PERFORMANCE AND

ACCOUNTABILITY REPORT

PEACE CORPS | 2005
F i s c A l y e A r 2 0 0 

The Peace corPs 

perFormAnce And AccountABility report

Produced By The Peace corPs

Paul d. coverdell Peace corPs headQuarTers

1111 20Th sTreeT nw | washingTon dc 20526
The	vision	of	the	Peace	Corps—to	promote	

world	peace	and	friendship	by	providing	

Americans	of	all	backgrounds,	who	wish	to	

serve,	a	quality	Volunteer	experience	in	a	

safe	and	secure	manner	as	they	help	host	

communities	meet	their	needs,	and	then	

return	to	advance	a	better	understanding	

of	the	countries	in	which	they	served.
conTenTs

mAnAgement’s discussion And AnAlysis 

messAge From the director 5

oVerVieW 8

core issues 8

mission 9

Peace corPs organiZaTion 10

mosT imPorTanT Performance

goals and resulTs 11

acTions To address challenges

and fuTure challenges 13

sysTems, conTrols, and 

legal comPliance 15

PresidenT’s managemenT agenda 17

perFormAnce results 24

strAtegic goAls 25

perFormAnce results 26

FinAnciAl report 40

letter From the

chieF FinAnciAl oFFicer 41

FinAnciAl stAtement And notes 44

Auditor’s report 70

inspector generAl’s summAry 97

Agency’s response 105

other reports 110

Appendices 111

current stAtus oF prior Audit 

recommendAtions directly inVolVing 

FinAnciAl processes 112

current stAtus oF prior yeAr Audit 

recommendAtions not directly inVolVing 

FinAnciAl processes 117

peAce corps Acronyms 122



The Peace Corps | performance and accountability report | fiscal year 2005

management’s discussion and analysis



The Peace Corps | performance and accountability report | fiscal year 2005 

On behalf of the more than 7,800 Americans currently serving in 77 countries through 71 posts around the 

world as Peace Corps Volunteers, I am pleased to present the Peace Corps’ Performance and Accountability 

Report (PAR) for fiscal year 2005. This report summarizes the agency’s achievements, measures its performance 

against pre-established objectives, and includes the financial results of its operations during the past year. 

Since its inception in 1961, the Peace Corps has sent more than 182,000 Volunteers to serve in 138 countries 

around the globe—from Azerbaijan to Zambia—promoting the Peace Corps’ mission of world peace and friendship. Volunteers share their time and talents by serving as teachers, business advisors, information technology 

consultants, agriculture and environmental specialists, and health and HIV/AIDS educators carrying out the 

agency’s three goals:

1) to help the people of interested countries in meeting their need for trained men and women;

2) to help promote a better understanding of Americans on the part of the peoples served; and

3) to help promote a better understanding of other peoples on the part of Americans.

As of the end fiscal year (FY) 2005, 7,810 Volunteers were serving in the Peace Corps—the largest number of 

Volunteers since 1974.1 The interest among Americans to serve in the Peace Corps continued with applications 

up by 48 percent since October 2001. The Volunteers serving in FY 2005 provided 6,411 years of effort, which 

reflects their commitment to live in and integrate with the communities at their sites of assignment.2 The Peace 

Corps returned to China in FY 2005 with 40 English language teachers; the newest group of over 50 trainees 

was sworn in as Volunteers in September 2005. In addition, Crisis Corps Volunteers were deployed to Southeast 

Asia to help in recovery and rebuilding efforts following the devastating tsunami.

Additionally, 131 Crisis Corps Volunteers, through a coordinated effort with Federal Emergency Management 

Agency (FEMA), responded to the call to assist fellow Americans in the aftermath of Hurricanes Katrina and 

Rita—the first time ever that Volunteers have been deployed domestically.

Also, the Peace Corps has expanded its role in the President’s Emergency Plan for AIDS Relief (Emergency Plan), 

fielding an additional 56 Volunteers, and now has direct involvement in the Emergency Plan in the nine focus 

countries where the Peace Corps is working.3 Additionally, the Peace Corps developed Emergency Plan programs 

in nine other countries.4

THE DIRECTOR OF THE PEACE CORPS

WASHINGTON, D.C.

1

	 This 7,810 is an “on-board” count of all Peace Corps Volunteers and trainees, Crisis Corps Volunteers, and United Nations Volunteers

serving under the Peace Corps. On September 6, 2005, FEMA requested 400 Volunteers and the agency deployed 131 Volunteers by

September 30; through the Emergency Plan, the agency deployed 56 Volunteers. In total, under these various federally funded programs,

7,997 Volunteers were deployed under the administration and support of the Peace Corps.

2

	 This measure reflects that Volunteers are engaged in their assignments 24 hours a day, seven days a week.

3	 These countries include: Botswana, Guyana, Kenya, Mozambique, Namibia, South Africa, Tanzania, Uganda, and Zambia.

4

	 These countries include: Malawi, Lesotho, Swaziland, Dominican Republic, Eastern Caribbean, Panama, Ukraine, Morocco, and Thailand.

Management’s discussion and analysis

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The Peace Corps | performance and accountability report | fiscal year 2005

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The Peace Corps | performance and accountability report | fiscal year 2005

management’s discussion and analysis

Recognizing the important role that the Peace Corps has in the global fight against HIV/AIDS, the agency established a Global AIDS office within the Office of the Director. This new office will provide agency-level policy; 

overall leadership; and general supervision, direction, and coordination of all HIV/AIDS activities relating to 

the operations of the Peace Corps. This office will work to leverage the unique niche of the Peace Corps and 

Volunteers working with communities and local organizations to take the agency’s already successful HIV/AIDS 

efforts to new levels. 

Volunteer safety and security remains the agency’s highest priority. The Peace Corps’ approach to safety and 

security acknowledges that Volunteer service has inherent risks, but emphasizes that the agency will do its part 

to ensure that safety and security systems and support are in place while the Volunteer also agrees to assume 

personal accountability. The safest and most secure Volunteers are those who take personal responsibility for 

their behavior and who are well-known in their communities and integrated into the culture. The Peace Corps 

ensures that safety and security information is fully incorporated in all aspects of Volunteer recruitment, training, and service. Staff continually track and study Volunteer crime- and safety-related incidents, and these data 

analyses are used to generate annual safety reports that identify and analyze trends in safety conditions among 

in-service Volunteers and to enhance existing policies or to develop new policies and procedures, as needed. The 

Peace Corps’ Volunteer safety and security support system is managed by the associate director for safety and 

security, a crime statistics and analysis unit, and a Volunteer Safety and Overseas Security Division with nine 

regional safety and security officers stationed overseas. Additionally, there is a safety and security coordinator at 

every post and each region has three headquarters-based safety and security desk officers. 

For the first time in its 44-year history, the Peace Corps has prepared comparative financial statements in a 

timely manner that comply, to the extent possible, with OMB guidelines and the Accountability of Tax Dollars 

Act of 2002.5

Where possible, the accompanying financial statements conform to the hierarchy of accounting principles approved by the Federal Accounting Standards Advisory Board; Office of Management and Budget (OMB) 

Circular A-136, and the Department of the Treasury’s Treasury Financial Manual and related bulletins. 

The agency is committed to the principles and objectives of the Chief Financial Officers Act of 1990 and the 

Accountability of Tax Dollars Act of 2002.

The accompanying statements summarize the agency’s financial position; disclose the net cost of operations and 

changes in net position; and provide information on budgetary resources and financing for fiscal years ended 

September 30, 2005, and 2004. These 

statements reflect activity of appropriated 

funds, with footnote recognition for those 

Trust Fund and Special Fund Receipt accounts over which the agency has fiduciary 

stewardship.

Summary of Asset Balances

September 30, 

2005

September 30, 

2004

Fund Balance with Treasury $128 Million $121 Million

Property, Plant, and Equipment $ 42 Million Not Reported

Total Assets $176 Million $126 Million

Summary of Revenue 2005 2004

Appropriations $317 Million $308 Million

Total Financing Sources $320 Million $323 Million

5

	 The statements should be read with the realization that they are a component of the overall statements of the U.S. government.


The Peace Corps | performance and accountability report | fiscal year 2005

management’s discussion and analysis



The Peace Corps | performance and accountability report | fiscal year 2005 

management’s discussion and analysis

The agency had total assets of $176 million as of September 30, 2005, and $126 million as of September 30, 

2004. In FY 2005, the agency established values for property, plant, and equipment, and recorded such values as 

of September 30, 2005. 

Financing sources totaled $320 million in FY 2005 and $323 million in FY 2004, of which appropriated funds 

(net of recission) totaled $317 million and $308 million, respectively, and are available for use by the agency.

The Peace Corps continues, with OMB approval, to fine-tune the performance plan that established performance indicators for fiscal years 2004–2006. These indicators helped ensure achievement of the agency’s strategic goals and were based on past experience with the previous strategic plan. The Peace Corps is now reviewing 

its strategic goals to ensure that they match the outcome-based evaluations of the updated strategic plan. The 

agency’s FY 2005 performance plan results are based on reliable, actual data and/or a combination of actual 

data through most of the year with an estimate of results for the last quarter of the fiscal year. 

The financial statements are generally complete and reliable to the best of the agency’s knowledge, except for 

those items mentioned in the CFO letter. Details of corrective actions to be taken are stated in the CFO letter 

and related appendices. The Peace Corps’ financial systems conform to government-wide standards in most material aspects. An upgrade in January 2006 will enable the agency to charge interest on delinquent advances and 

receivables. The agency will continue to use the Peace Corps Financial Statement Generator to produce its financial statements until such time as Oracle software will produce them directly from the General Ledger.

The agency has established a policy for an internal management controls system. Generally, this system institutes fiscal and programmatic accountability through an integrated planning and budgeting system. Under this 

policy and system, the agency has appointed a chief compliance officer and a director of performance reporting 

and compliance. As the agency develops a contiguous monitoring system, it will conduct an overall assessment 

of these controls. After this overall assessment has been conducted, the agency hopes to be in a position to provide a statement of assurance as required by the Federal Managers’ Financial Integrity Act.

The Peace Corps looks forward to continuing its mission by sending men and women who represent America’s 

rich diversity to promote peace and friendship around the world. These dedicated Americans will serve in distant communities, sharing their skills and their own experiences, and then bring their experiences back home to 

educate others about the people and cultures in which they have served. 

The agency’s focus will be to strengthen public

awareness of the work of Volunteers and of the

Peace Corps’ long-term sustainability.

Gaddi H. Vasquez

Director


The Peace Corps | performance and accountability report | fiscal year 2005

management’s discussion and analysis



The Peace Corps | performance and accountability report | fiscal year 2005

management’s discussion and analysis

The Peace Corps is pleased to be able to carry out 

President Bush’s call to public service and his goal to 

expand the number of Peace Corps Volunteers serving in the field. At the end of fiscal year 2005, 7,810 

Volunteers were serving in the Peace Corps—the 

largest number of Volunteers since 1974—in the areas of agriculture, business development, education, 

the environment, health and HIV/AIDS education 

and prevention, and youth development.6 In addition to these major sectors, Volunteers work to introduce information technology into their projects. 

Currently, about 20 percent of Volunteers are serving in nations with predominantly Muslim populations in West and North Africa, the Middle East, 

Europe, and Central Asia. However, the Peace Corps’ 

mission and efforts in these regions are the same as 

in other areas of the world. Host communities experience positive and personal images of Americans, 

and returning Volunteers share their new understanding of these different cultures with friends, 

family, and communities back home. 

At the end of FY 2004, more than 3,100 Peace 

Corps Volunteers were engaged in HIV/AIDS activities, assisting nearly 815,000 people in areas 

of prevention and care. By knowing local cultures 

and languages, Peace Corps Volunteers are uniquely 

positioned to focus on this presidential priority at 

the grass-roots level. All Volunteers who serve in 

African nations—regardless of their program sector—are trained to provide HIV/AIDS prevention 

and education. Fighting the HIV/AIDS pandemic 

is paramount to the survival of people across the 

globe, and it is an important mission of the Peace 

Corps. To that end, the Peace Corps established a 

Global AIDS office within the Office of the Director 

to provide an even greater focus to the agency’s efforts. This new office will coordinate HIV/AIDS 

efforts throughout the Peace Corps to help ensure 

the agency plans and implements effective programs. The office is also responsible for coordinating 

programs with the President’s Emergency Plan for 

AIDS Relief and its focused efforts to stem the tide 

of this disease.

The safety and security of Peace Corps Volunteers 

continues to be the agency’s top priority. As the 

number of Volunteers in the field expands, the Peace 

Corps remains committed to providing the optimum conditions for all Volunteers, including a safe 

and secure environment and quality programming 

and training. The work of past, present, and future 

Peace Corps Volunteers remains critical. The Peace 

Corps is well-positioned to safely expand and build 

upon the successes of the past 44 years.

Overview | core issues

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6

	 See Note 1.

The creation of a global AIDS office places

the Peace Corps squarely in the middle of this

historic effort, and it is the first of many steps

the Peace Corps will take to enhance and

sustain its involvement in this critical issue

over the long term.


The Peace Corps | performance and accountability report | fiscal year 2005

management’s discussion and analysis



The Peace Corps | performance and accountability report | fiscal year 2005 

management’s discussion and analysis

The Peace Corps’ mission is to promote world peace 

and friendship by assisting interested countries 

while providing an effective and satisfying Volunteer 

experience for a diverse group of Americans in a 

safe and secure environment, and by building an 

operational infrastructure that efficiently and effectively supports the Peace Corps Volunteer in the 21st 

century.

Development indicators suggest that nations on all 

continents face significant challenges to improve 

development, information technology, agriculture, 

education, sanitation and environment, health, and 

business.

The Peace Corps provides practical assistance to 

developing countries by sharing America’s most 

precious resource — its people. The Peace Corps 

combines development with people-to-people relationships that Volunteers forge with host country 

colleagues and communities. This serves as a crucial 

foundation for peace and friendship for generations 

to come.

Americans remain eager to serve their country 

through the Peace Corps. This year, the Peace Corps 

achieved a historic high in the number of Volunteers 

meeting the needs of communities around the world.

The agency continues to receive high numbers 

of applicants for a limited number of opportunities. Interest in the Peace Corps at home continues 

to grow with visits to the website increasing by 

over 8 percent, for a total of 7.9 million visitor sessions. The Peace Corps also continues to be in high 

demand. Countries with established Peace Corps 

programs regularly seek to expand the total number 

of Volunteers serving, and the Peace Corps has received dozens of requests to establish or re-establish 

programs. In FY 2005, the Peace Corps established 

a Crisis Corps program in Sri Lanka, and conducted 

assessments in Cambodia, Chile, and Ethiopia.

The core values of the Peace Corps since it was established on March 1, 1961, remain relevant, vital, 

and strong. During the past 44 years, more than 

182,000 Americans have served as Peace Corps 

Volunteers and promoted the agency’s mission of 

world peace and friendship. Volunteers have helped 

dispel misconceptions about Americans; assisted 

in fostering positive relationships with host country 

nationals; promoted sustainable development; and 

returned back home with messages to share about 

life overseas, the people they have served, and the 

cultures they have experienced. While much has 

changed since the Peace Corps’ founding in 1961, its 

mission has not. Throughout the world, Peace Corps 

Volunteers continue to bring a spirit of hope and 

optimism to the struggle for progress and human 

dignity.

Overview | mission

U

Education Volunteer teaches young schoolchildren 

in Paraguay
10

The Peace corPs | performance and accountability report | fiscal year 2005

managemenT’s discussion and analysis

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The Peace corPs | performance and accountability report | fiscal year 2005

managemenT’s discussion and analysis

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The Peace corPs | performance and accountability report

Executive

Secretariat

Deputy Chief of Staff/

Deputy Chief 

of Operations

Office of American 

Diversity/EEO

Office of the

General Counsel

Director

Deputy Director

Overseas Posts

Office of 

Safety and Security

Office of

Volunteer Recruitment

and Selection

Office of the Chief

Financial Officer

Office of 

Private Sector

Initiatives

Office of Planning,

Policy, and Analysis

Office of

Congressional

Relations

Office of 

Press Relations

Office of Global AIDS

Coordinator

Office of

Compliance

Office of 

Volunteer Support

Office of 

Management

The Center for 

Field Assistance &

Applied Research

Office of the Chief

Information Officer

Crisis Corps

Office of 

Communications

Overseas Posts

Inter-America and 

the Pacific Region Africa Region

Overseas Posts

Europe,

Mediterranean, and 

Asia Region

Office of the

Inspector General

Chief of Staff/

Operations

Office of Acquisitions

and Contract

Management

Note:	 In	their	functions	as	Chief	Financial	Offi	cer	and	Chief	

Information	Offi	cer,	the	incumbents	report	directly	to	

the	Director.	The	Offi	ce	of	Acquisitions	and	Contract	

Management	reports	to	the	Chief	of	Staff	with	a	dotted	line	

report	to	the	Director.

overview | peAce corps orgAniZAtion

This chart refl ects 

the current status, 

but is pending 

formal inclusion in 

the Policy	Manual

U
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The Peace corPs | performance and accountability report | fiscal year 2005

managemenT’s discussion and analysis

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The Peace corPs | performance and accountability report | fiscal year 2005 

managemenT’s discussion and analysis

The current Peace Corps strategic plan was developed in 2003 for FY 2003–2008. The plan 

continues to refl ect the agency’s long-standing commitment to the unique role that its Volunteers perform to further the three goals set forth in the Peace 

Corps Act. In response to the President’s challenge 

for the Peace Corps, the agency is focusing on gradual expansion while providing a positive experience 

for all Volunteers in a safe and secure environment. 

The Peace Corps completed the Program 

Assessment Rating Tools (PARTs) for the fi rst time 

this year, enabling the agency to look critically at 

the four strategic goals to ensure they are an accurate measure of Volunteer work in the fi eld and at 

home. The PART results gave the Peace Corps an 81 

percent rating, which is very good for its fi rst-ever 

PART. At the same time, the Peace Corps discovered 

the need to adjust several goals and indicators to 

better enable the agency to measure outcomes. OMB 

has endorsed this effort, and it will be completed by 

the end of November 2005. However, the current 

goals and results are based on the strategic plan 

prior to needed modifi cations.

Overall, the most important goals come from the 

strategic plan. Each strategic outcome goal is a key 

measure of the agency’s overall performance. During 

FY 2005, the Peace Corps successfully met most of 

these goals. The fi rst goal—increasing the number of 

Volunteers in the fi eld—positioned the Peace Corps 

to grow at a rate consistent with the strategic plan. 

The goal for FY 2005 was to have 7,803 Peace Corps 

Volunteers in the fi eld, and the agency surpassed 

the goal with 7,810 Volunteers serving all around 

the world—7,997 including Volunteers sponsored 

by FEMA and the President’s Emergency Plan. This 

historic high is a tremendous achievement for the 

agency and is the result of previous years of work 

toward realizing this goal.

Furthermore, the agency was able to respond in 

strong measure to humanitarian crises that took 

place in FY 2005. 82 Crisis Corps Volunteers were 

deployed to serve throughout the world, including in the Southeast Asia region for recovery and 

rebuilding efforts for those devastated by the tsunami. Crisis Corps Volunteers also assisted in shortterm assignments fi ghting the AIDS pandemic in 

Africa. An additional 134 Crisis Corps Volunteers, 

funded through FEMA, mobilized domestically 

to help fellow Americans deal with the aftermath 

of Hurricanes Katrina and Rita in the Gulf Coast 

region.7

overview | most importAnt perFormAnce goAls And results

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0

3000

6000

9000

12000

15000

18000

1961 1966 1971 1976 1981 1986 1991 1996 2001 2005

124 

15,556 

8,044 7,810

Figure: Number	of	Volunteers	on	board	at	the	end	of	the	fi	scal	year,	1961–2005

Fiscal	Year

Volunteers

(thousands)

7

		 At	the	end	of	FY	2005,	a	total	of	131	Crisis	Corps	Volunteers	were	“on	board.”	Also	see	note	1.

*7,997	including	CCVs	and	PVCs	through	FEMA	and	the	Emergency	Plan

*
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The Peace Corps | performance and accountability report | fiscal year 2005

management’s discussion and analysis

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The Peace Corps | performance and accountability report | fiscal year 2005

management’s discussion and analysis

Reacquainting the American People

with the Peace Corps

The Peace Corps continues to reacquaint the 

American people with its mission and ask new 

waves of Americans to apply to serve overseas. While 

the Peace Corps continues to receive a strong interest from Americans wanting to serve, applications 

made online were lower than targeted, concomitant 

with an overall decline in applications received

during FY 2005. However, the Peace Corps reached 

its important goal of increasing underrepresented 

ethnic and age group applicants, surpassing the

FY 2005 goal of 21 percent with a 24.5 percent total.

The Peace Corps continues to reach wide audiences 

with its marketing campaign, Life is calling. How

far will you go? The campaign has surpassed the 

previous recruitment campaigns’ three-year-total 

donated media in half the time. The “out-of-home” 

public service announcements (PSAs) have appeared on billboards on highways, and on posters 

in train stations, metro-rail cars, and buses. This 

new way to reach mass audiences is also helping the 

Peace Corps target diverse neighborhoods and colleges. Among the campaign’s many awards to date 

is the prestigious Gold EFFIE from the American 

Marketing Association, awarded for most effective 

recruitment results and creative execution. 

Another key indicator of Volunteer overall satisfaction of safety and security is the early termination 

(ET) rate. The FY 2005 ET rate remained at a relatively low rate compared to the historical average, 

but did not meet the performance goal.8 The Peace 

Corps has developed a new way to capture specific 

feedback to provide valuable insight from Volunteers 

and staff on the reasons behind ETs, and this information will help shape Peace Corps efforts effectively. The agency plans to review the methodology for 

determining the ET rate to ensure the data collected 

provide a meaningful basis for analysis.

The Peace Corps had an increased number of returned Peace Corps Volunteers (RPCVs) visiting 

schools and organizations around the country and 

significantly surpassed its FY 2005 goal. Improved 

data collection allowed the agency to better track 

the multitude of interactions that took place, though 

efforts will continue to improve the agency’s ability 

to capture the interactions that remain unreported.

While the number of RPCVs participating in Peace 

Corps Week (the main project whereby RPCVs visit 

schools) was at a record high, the total fell short of 

the performance goal.

Last year, the Peace Corps discovered that the timing of several data-producing efforts, including the 

biennial Volunteer survey and the project status 

reports, are out of sync with the timing of the PAR. 

While the agency has adjusted the timing of future 

Volunteer surveys so that results coincide with PAR 

due dates, the project status reports cannot be

adjusted without diminishing their value. A longterm solution for collecting, collating, and disseminating these reports will be explored over the next 

two years.

8 ET means early termination of service. This can include resignation, administrative separation, medical separation, and/or interrupted

service. The 12-month ET rate is found by dividing the number of trainees and Volunteers who separated from the Peace Corps during the

previous 12 months by the total number of trainees and Volunteers who served at any time during the same previous 12 months. This report

has been produced at the end of each quarter starting in FY 2004.
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The Peace Corps | performance and accountability report | fiscal year 2005

management’s discussion and analysis

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The Peace Corps | performance and accountability report | fiscal year 2005 

management’s discussion and analysis

In FY 2005 the Peace Corps committed to

•	 Continue ongoing efforts to update its policy

manual.

The agency continues to update its policy manual. 

To further assist with policy review, revision, and 

formulation, the Director formed a high-level policy 

review board.

•	 Balance increased security needs against

resources and expansion commitments.

The Director has stated that the Peace Corps’ expansion will not outpace its ability to maintain the 

infrastructure necessary for Volunteer safety, security, and support needs. As an integral component 

of the Peace Corps, the Office of Safety and Security 

assesses and recommends appropriate security considerations when the agency contemplates a new 

country entry. Additionally, as part of the operational role of the Volunteer Safety and Overseas Security 

Division, Peace Corps safety and security officers 

(PCSSOs) routinely visit posts to make appropriate 

security recommendations concerning programmatic and physical components of each post’s operation. Their knowledge of the unique environment of 

the Peace Corps allows them to make resource-conscious recommendations that maximize the security 

of Volunteers and staff.

During the first three quarters of FY 2005, the 

Office of Safety and Security participated in security 

assessments of two potential new country entries, 

Cambodia and Chile, and the expansion of programming in two new areas of the Philippines. The office 

has also been actively engaged in the possible opening of a new program in Ethiopia. PCSSOs provide 

recommendations about potential placement locations, overall crime trends and security risks, and 

the physical security of potential office and housing 

sites. Their recommendations help decision-makers 

choose adequate security options or program entries 

that match the programmatic and fiscal realities of 

the Peace Corps.

Overview | Actions to Address Challenges and Future Challenges

U

In strengthening the overall security posture of the 

Peace Corps, the office also provides security consulting and training to all currently operating Peace 

Corps posts. PCSSOs have sub-regional responsibility for assisting posts with their security needs, and, 

in FY 2005, they visited, assessed, and trained staff 

and Volunteers in 59 of the 71 Peace Corps posts 

along with one assessment of a stand-alone Crisis 

Corps post. Additionally, the office is training all 

Peace Corps local-hire safety and security coordinators. These training workshops focus on institutionalizing a standardized position description and 

ensure that the safety and security coordinators understand their job responsibilities and are prepared 

to carry out their duties.

•	 Continue action to correct audit findings.

Progress and remaining corrective actions are addressed in the appendices under “Current Status of 

Prior Year Audit Recommendations."

•	 Stabilize, upgrade, and enhance the

Odyssey/FOR Post financial system.

The financial system satisfied the vast majority of 

the agency’s financial management requirements 

during this fiscal year. Additional enhancements are 

scheduled for January 2006 to bring the system into 

full compliance with criteria established by the Joint 

Financial Management Improvement Program.

•	 Refine its performance plan and adjust the

timing and nature of systems so the agency has

the data necessary for its performance report

and the PAR.

The agency made multiple adjustments to better 

track, document, and report on its performance 

against strategic goals and performance indicators. 

With the approval of OMB, the Peace Corps embarked on an effort to update its performance plan 

to better enable the agency to report on measurable 

outcomes.
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The Peace Corps | performance and accountability report | fiscal year 2005

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The Peace Corps | performance and accountability report | fiscal year 2005

management’s discussion and analysis

•	 Undertake a reconciliation project to resolve

imbalances with inherent accounts and external

sources and create procedures and disciplines to

regularly reconcile accounts.

This is an ongoing effort and considerable progress 

was made during the fiscal year to identify and 

resolve imbalances on a current basis and, where 

applicable, correct the systems logic that caused the 

imbalances.

•	 Reassess the financial management business

processes and realign organizational structure

to accommodate the new paradigm.

The basic structure of the Office of the Chief 

Financial Officer (OCFO) (formerly known as the 

Office of Planning, Budget, and Finance) was realigned to enhance managerial accountability for 

the various functions. As the analysis of business 

practices matures, it is likely that specific responsibilities at the next tiers will also be realigned.

•	 Train staff in the skills and disciplines of

financial management.

The majority of the OCFO staff attended an 

Appropriation Law course. Staff also attended professional development seminars and specialized 

training classes (e.g., payment certification) sponsored by the Department of the Treasury.

Future Challenges

Programming and training

Leadership development

Succession planning

Development and retention 

of institutional knowledge

Volunteer in Ecuador teaches youth baking skills
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The Peace Corps | performance and accountability report | fiscal year 2005

management’s discussion and analysis

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The Peace Corps | performance and accountability report | fiscal year 2005 

management’s discussion and analysis

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	 The underlying theories and methodologies for the program include the Zachman Framework, published by John Zachman, 1987;

and Enterprise Architecture Planning Methodologies, published by Steven Spewak, 1992. General procedural guidance for program

implementation is based on A Practical Guide to Federal Enterprise Architecture, published by the Federal CIO Council, 2001.

Enterprise Architecture

The Peace Corps Director established the enterprise 

architecture (EA) program in November 2002 

within the Office of the CIO. The objective was to 

modernize the systems and infrastructure to support the agency’s mission in the 21st century. The 

EA program establishes the analysis and governance 

framework support to implement the Clinger-Cohen 

Act of 1996, OMB Circulars A-11 and A-130, the 

Federal Information Security Management Act, and 

various other legislative and regulatory requirements. The Peace Corps’ EA is based on the federal 

enterprise architecture framework (FEAF). This approach, in connection with the emerging cross-agency reference models OMB is developing, provides 

the framework for implementing the EA program at 

the agency level and ensuring its alignment with the 

FEAF.9

The Office of IT Architecture, Standards, and 

Practices, reporting to the CIO, was established to 

manage EA program activities as well as to guide 

agency-wide IT data administration, governance, 

standards, and investment management programs. In FY 2003, the Peace Corps reconstituted 

its Investment Review Board (IRB) to function as 

the EA executive steering committee, chartered 

the EA advisory board to serve as the architecture 

review and configuration management board, and 

organized and staffed the EA core team to address 

EA operational activities. Integration between the 

EA and IT investment management began. The 

agency’s IT governance program was implemented 

through the IRB. The IRB reviews all new project 

proposals over $25,000 for alignment with the mission of the agency, prioritizes investment decisions, 

and develops sound business practices. 

The Peace Corps developed high- to mid-level current and future business component architectures 

in 2004. These component areas include: Volunteer 

delivery, human resources, safety and security, 

overseas posts, financial systems, and IT security. 

Starting in FY 2004 and continuing in FY 2005, 

these components’ architectures were merged into a 

complete end-to-end view of the Volunteer delivery 

system (VDS), the main business line of the agency. 

The initial mapping of agency business functions 

to the OMB business and performance reference 

models was also completed. The EA program is also 

mapping Peace Corps data to the recently released 

data reference model and expects to complete this 

VDS portion in FY 2006. In FY 2005, the recommendations for future business re-engineering 

derived from the EA work was documented and presented to the agency leadership. Prioritization and 

executive sponsorship for the recommendations to 

move through the IT governance process as new or 

improved business systems at the agency is expected 

in FY 2006.

In FY 2005, the Office of IT Architecture, 

Standards, and Practices set up the IT Project 

Management Office (PMO). Through the use of templates and repeatable processes and procedures, the 

agency will be better positioned to achieve successful project outcomes. Additionally, the use of earned 

value measuring as part of the PMO reporting functions will not only satisfy OMB mandates, but will 

provide executive management with the data needed 

to make informed decisions. The PMO has already 

returned value by assisting the overseas refresh project plan development, saving the agency $800,000.

Overview | Systems, Controls, and Legal Compliance

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Additionally, an agency solution for automating human resource management (HRM) processing of 

staff position descriptions, classification, posting, 

and recruiting was identified with the assistance 

of the EA program, and a business case was developed by a cross-organizational team. This proposal 

was presented to the IRB and ultimately recommended for funding. The first phase of the HRM 

modernization project is in progress. Concurrently, 

plans continue for developing and implementing 

a comprehensive policy, standards, and guidance 

framework in connection with an enterprise-wide IT 

investment management program. Through its EA 

program, the Peace Corps is strategically and methodically pursuing cross-program and enterprisewide initiatives to better meet the agency’s mission 

and goals. 

Financial Systems

The Peace Corps’ financial management system, 

Odyssey/FOR Post, went live on October 1, 2003. 

It is a highly integrated, enterprise-wide financial 

management and contracting system. The plan 

allows a phased-in implementation of core functionalities and future phase-in of additional functionalities and integration into FY 2007. 

The core modules implemented were: general ledger, accounts payable, purchasing, accounts receivable, project accounting, FOR Post overseas (front 

end), HRM (non-employee payments), and budget 

tracking through Oracle Financial Analyzer. The 

requirements of the joint financial management 

improvement program (JFMIP) were incorporated 

into product specifications with Oracle Federal 

Financials 11.5.7, which was sourced to develop and 

implement Odyssey/FOR Post. However, the commercial off-the-shelf product could not provide the 

foreign currency management functionality the 

agency required. Therefore, the Peace Corps, in 

collaboration with Oracle Consulting, customized 

the product to meet these requirements. As JFMIP 

requirements were further enhanced, Oracle Federal 

Financials 11.5.7 was no longer compliant with federal accounting processing. The agency will further 

assess enhancements once it has upgraded to the 

most recent version of Oracle Federal Financials.

Compliance

During FY 2005, the Peace Corps continued to 

monitor its compliance with Congressional mandates, regulations, and law, as well as its own policies. These efforts included addressing the following:

•	 Health Insurance Portability and

Accountability Act (HIPAA)

In order to adequately protect health information in 

compliance with HIPAA, the agency instituted new 

measures to secure appropriate authorization for the 

use of medical information for program administration purposes.

•	 Inspector General (IG) Report Compliance

The agency continued to build a comprehensive 

system of compliance with IG reports and recommendations, perform semi-annual reviews by region, 

actively work with the OIG prior to its field visits, 

participate in its debriefing meetings, and verify closure and compliance to responses. The Peace Corps 

also coordinated agency response to all IG reports 

and transmitted the semi-annual report to Congress.

•	 Safeguarding Social Security Numbers

The agency conducted a review in May 2005 of all 

departments addressing the use of social security 

numbers as identifiers. A task force is working with 

the relevant departments to either eliminate the use 

of the full nine digits or reduce it to four digits.
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Overview | PRESIDENT’S MANAGEMENT AGENDA

The Peace Corps has examined its stated performance goals, indicators, and targets within the context of the President’s management agenda and the 

five government-wide management initiatives. The 

management initiatives foster reform and provide a 

common accountability standard among all federal 

agencies. These initiatives include:

•	 strategic management of human capital;

•	 competitive sourcing;

•	 improved financial performance;

•	 expanded e-government; and

•	 budget and performance integration.

The Peace Corps—using established performance 

goals and strategies from its integrated planning 

and budget system—will link existing performance 

indicators to measure achievement of strategic goals 

and the core criteria used to measure progress under 

the President’s management agenda. For example, 

one core element of success under “strategic management of human capital” is that there should be 

no skill gaps or deficiencies in mission-critical occupations. This is measured, in part, by the first objective in the Office of Management’s performance 

indicators, which tracks personnel recruitment 

and placement. Another example under “improved 

financial performance” is for financial systems to 

produce accurate and timely financial information 

to support operating, budget, and policy decisions. 

This area is measured by the Office of the Chief 

Financial Officer’s objective that tracks timely and 

accurate acquisition, budget, and financial reports 

to management and external entities.

Strategic Management of Human Capital

The Peace Corps is implementing a sound, responsible workforce strategy to reduce management layers; 

organize functions more efficiently; and support a 

diverse, dynamic workforce committed to a citizencentered government and quality service. 

To implement this strategy, the agency has launched 

the automated human capital management system 

in compliance with the agency’s enterprise architecture. This system is being tested and is expected 

to be used agency wide by June 2006. Applicants 

now use the automated system to apply for positions 

and hiring managers use the system to review applications and to select hiring panel members and 

applicants for interview. The Human Resources 

Management Office will also be using additional 

automated modules to enhance performance management processes, management/employee relations, 

and enterprise learning (encompassing a variety of 

training methods and developmental skill assessments). These enhancements will modernize the 

Peace Corps’ human capital management system so 

the agency can compete effectively for quality staff. 

This strategic human capital enhancement will be 

one of the landmark changes in the Peace Corps’ 

management processes. 

The mission of the Peace Corps—to promote world 

peace and friendship—has remained constant during the past 44 years and it is the linchpin of the 

agency’s three goals. Peace Corps Volunteers remain 

the heart and soul of the Peace Corps, and its domestic and overseas staff exists to support them 

and their efforts in the field. The Peace Corps has 

been and continues to be committed to workforce 

re-engineering.

Every federal government department and agency 

faces significant employment challenges. The Peace 

Corps employment situation is compounded by its 

“five-year rule,” which generally imposes a five-year 

term limit of employment for all U.S. citizen directhire employees. The average length of employment is 

two years, significantly impacting the culture, organization, and operations of the agency.

On one hand, time-limited appointments foster a 

non-bureaucratic, energized, “can-do” atmosphere 

where employees make the most of their limited tenure. Changes in specific workforce skill requirements 

respond to the built-in turnover. Supervisors and 

employees are more likely to forge satisfactory working relationships, given the short-term employment 

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cycle, minimizing long-term employee relations 

problems. On the other hand, challenges include the 

need for strong internal controls, standard policies, 

and operating procedures.

During FY 2001, the Peace Corps completed a comprehensive workforce analysis that identified areas 

of need and potential strategies to address those 

needs. As a result, the agency continues to initiate improvements in how it recruits, selects, and 

places Volunteers. It is also exploring alternative 

staffing patterns, both domestically and abroad, 

for Volunteer support functions. The Peace Corps 

has strengthened its internal human resource communication during the past year through increased 

human resource management bulletins, flyers, 

Internet/Intranet training, and informational links 

provided via e-mail, while also providing current employee information to Peace Corps staff on 

changes in federal benefits, programs, and training 

opportunities. 

Other sources of training information and staff 

communication tools include compact discs for overseas staff that contain supervisory training, career 

development, retirement planning, and performance 

issues. In addition to e-mail and Intranet and 

Internet tools, the Human Resources Management 

Office frequently conducts monthly supervisory 

roundtable discussions on employee issues and concerns along with “lunch-and-learn” sessions covering 

a variety of topics. These informal training sessions 

are open to all staff and are typically facilitated 

by employees who have attended training sessions 

sponsored by the Small Agency Council. 

In a continuing effort to enhance employee skills 

and to provide them with developmental training, the Peace Corps is launching a new Leadership 

Development Academy, which will help train and 

retain staff for future leadership employment 

opportunities.

Additionally, the Peace Corps is committed to institutionalizing accountability standards for all staff, 

increasing e-government participation, and fully 

implementing a competitive sourcing strategy. These 

will help ensure mission-critical occupations are adequately staffed.

Competitive Sourcing

The agency continues to improve the efficiency 

of its commercial activity functions by increasing 

commercial activities under performance-based 

contracts. This strategy includes continually reviewing and refining performance-based contracts 

(e.g., information technology management, voucher 

processing, and accounting services); performing 

comprehensive analyses of the agency’s commercial 

activity inventory and the potential for converting 

additional activities to performance-based contracts; and compiling best practices of contractors 

and performance-based contracting. To convert additional activities to a performance-based contract 

platform, the Peace Corps is exploring effective 

approaches to identifying and publicizing opportunities for contract sourcing. Following the Federal 

Activities Inventory Reform Act, the agency will 

explore conversion competitions (i.e., assess the appropriateness and cost-effectiveness of competing 

federally performed functions for private sector performance contracts) and cost competitions across a 

broad range of functions. The Peace Corps will also 

review the need to increase knowledge of various 

OMB A-76 methodologies among its managers and 

support staff. 

Identifying and accessing sources to productively enhance the agency’s mission is ongoing. 

Adjustments to operations because of budgetary 

constraints have caused each office to examine how 

services are delivered. Of Peace Corps’ FY 2004 

$320 million appropriation, approximately $136 

million was outsourced to procure goods and a 

wide range of noninherently governmental services 

ranging from professional medical care to software 

development.10

10	 See note 8.
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Improved Financial Performance

The Peace Corps converted to Oracle Federal 

Financials in October 2003 and prepared its first 

set of financial statements in FY 2004. Quarterly 

financial statements for the first three quarters of FY 

2005 were submitted to OMB per Bulletin 01-09 

as amended. In addition, the agency’s Investment 

Review Board was reconstituted to facilitate the 

decision-making on enterprise-wide information 

technology improvements. For FY 2006, the agency 

is planning additional improvements in the following areas:

•	 Restructuring OCFO to better align with 

functions and processes.

•	 Completing the documentation of revised/new 

business processes.

•	 Upgrading to a JFMIP-compliant version of 

Oracle Federal Financials.

•	 Implementing additional functionality of the 

human resources management system module 

to accommodate Volunteer payments.

•	 Assessing, designing, and implementing the 

next generation of FOR Post front-end for 

Oracle Federal Financials.

•	 Planning and designing integration with future 

enterprise-wide systems such as human capital 

management.

Expanded E-Government

As the President’s management agenda suggests, 

expanded e-government is a keystone to fostering a 

citizen-centered government with a greater volume 

of service at lower costs. The agency’s challenge is to 

ensure that its investments in information technology are put to the best use, providing for the security 

and integrity of its systems. The Peace Corps’ e-government initiatives also help to overcome agency 

bureaucratic divisions and to increase productivity 

and electronic access for citizens. This all enhances 

transparency of programs and operations. 

Consistent with current government-wide management reforms, the Peace Corps plans to increase the 

use of information technology and e-government 

services to strengthen the quality, efficiency, and 

timeliness of recruiting, assessing, and selecting 

prospective Volunteers. The agency is planning a 

business process re-engineering of the Volunteer 

delivery system to deliver services and information 

in a citizen-centric manner that promotes transparent customer service, security, and privacy. A fully 

citizen-centered Web presence has been completed. 

This includes Web-based outreach to attract new 

applicants; an extensive electronic information site 

for prospective Volunteers and their families and 

friends; an online application, medical history form, 

and reference submission; and an online tracking 

system that allows applicants to check their status at 

each step of the application process. 

The Peace Corps annually collects and analyzes 

overseas project and training data from posts and 

produces a global summary report on trends, challenges, and promising practices. It is currently developing an Intranet-based system to collect these data 

and is using Web-based technology to disseminate 

the information back to the field and other parties in 

its diverse audience. By improving information technology and flow, the Peace Corps can provide timely 

reports to the public at reduced operational costs.

One of the Peace Corps’ mandates is to foster a better understanding of other peoples on the part of 

Americans. The Coverdell World Wise Schools program fulfills this mandate by providing services and 

resources to K–12 schools throughout the United 

States. Services include linking Volunteers and returned Volunteers with American schools through 

the Correspondence Match program, a speakers’ 

bureau, and Peace Match. Additionally, numerous 

publications, multimedia resources, and curriculum 

materials, available online at no cost, provide a wide 

range of effective learning tools for teachers. 

The enterprise-wide information architecture approach will identify and document all agency computer systems and guide the management of the 

agency’s IT portfolio. A new data architect to the enterprise architecture program is documenting all of 
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the data required for the Volunteer delivery system’s 

modernization within the guidance of the OMB’s

data reference model. The Peace Corps continues to 

implement IT security policy and disaster recovery 

plans to secure the information that is stored and 

processed on agency computers. It also continues to 

move its legacy systems from older mainframe technologies to Web-enabled ones, providing vast potential for e-government solutions and service delivery. 

The mainframe migration project is targeted for 

completion in early FY 2006. As applications move 

to this distributed environment, outdated technology will be retired. 

The Peace Corps implemented tools such as Web 

Inspector and System Management Server (known 

as SMS) to ensure secure use of its Web-based assets 

in FY 2004. The agency deployed the Volunteer information database application globally to standardize the systems and database that manage Volunteer 

information. It also implemented an electronic 

medical records process that allows the encryption 

and secure transfer of Volunteer medical information overseas. Additionally, the Peace Corps reached 

an agreement with OPM to implement an online 

personnel security clearance processing system 

(electronic questionnaires for investigations processing or E-QIP). Other e-government investments 

included an electronic capital property inventory 

tool (in review and testing for future integration), a 

Web-enabling recruitment database system (RDS), 

and a software application called Prospect Manager, 

which will assist recruiters in tracking information 

from prospective Volunteers. RDS allows recruiters 

to plan, promote, and manage recruitment activities. 

Recruiters can now post and update recruitment 

events on the Internet. The Prospect Manager system maintains information regarding individuals’ 

contact information and skill sets, and allows the 

recruiters to view and manage data entered by prospective applicants on the Peace Corps’ website.

The Peace Corps will continue to align its IT systems with core business processes to ensure that 

agency priorities are achieved. Planned activities for 

FY 2006 include:

•	 Assessing requirements of the Health Insurance

Portability and Accountability Act (HIPAA)

and recommending systems for compliance.

Requirements have been assessed and recommendations issued based on these assessments, which the 

agency is working to implement. 

•	 Standardizing processes in the Volunteer

delivery system to enable an automated, online

administration and tracking system.

This is a key business requirement of the EA modernization effort of the VDS. Recommendations are 

being reviewed in FY 2006 for prioritization and 

funding sponsorship.

•	 Identifying areas for new and underutilized

recruitment markets, reducing application

processing time, and increasing applicant-to

trainee retention rates via the Intranet.

In an effort to streamline business processes to 

reduce applicant processing time, the Office of 

Volunteer Recruitment and Services (VRS) is undergoing a beta test at regional recruitment offices to 

measure the time from when applicants are nominated to their Peace Corps service. This beta study 

will test innovative business processes for FY 2006. 

Additionally, the Peace Corps’ online application 

added an Intranet reference capability for applicants, 

which has made the application process easier for 

applicants and decreased turnaround time. The 

actual retention rate will be measured as part of the 

beta site testing next year. 

•	 Streamlining the crime-reporting process for

Volunteers through an electronic system with

real-time incident reporting capabilities.
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The Office of Safety and Security has worked closely 

with the Offices of the Inspector General, Medical 

Services, and the CIO on the development of a crime 

incident reporting system (CIRS). This is a collaborative solution that collectively solves the needs 

of the post, regions, and above named offices. The 

system addresses data confidentiality, privacy, data 

integrity, and separation of duties by ensuring that 

each part is forwarded only to the appropriate receiving office. The initial systems and content of the 

CIRS have been developed and are currently being 

field tested. The feedback from the pilot phase will 

highlight both the technical and substantive issues 

that need to be addressed. An agency-wide rollout 

of the new system is anticipated in fiscal year 2006. 

The crime incident reporting form was submitted to 

the Federal Register as a system of records on May 

16, 2005 

•	 Redesigning the Peace Corps Intranet site.

The Peace Corps’ Intranet site was redesigned with 

enhanced search capabilities allowing easier access 

to all information. The site is continually being enhanced to better serve the agency by expanding the 

sharing and exchange of critical information across 

the whole agency. The design keeps content fresh by 

improving the ease of managing and updating the 

site. The search enhancements improve the ability to 

find and retrieve information quickly and efficiently 

as well as improve the accuracy of search results. 

•	 Upgrading key Microsoft-based information

to set the foundation for more innovative

e-solutions.

The first phase of this effort is underway, with a 

complete enterprise active directory implementation 

planned for FY 2006. This infrastructure enhancement is part of the business modernization process 

that will enable global Peace Corps solutions.

Budget and Performance Integration

The integrated planning and budget system (IPBS) 

is the framework the Peace Corps uses to carry out 

planning and budget functions. Its underlying principles are:

•	 Plan drives budget. The Peace Corps strives to 

make its resource allocation decisions based on 

the goals and priorities of the agency. However, 

budget constraints may not allow the funding of 

every proposed plan.

•	 Reasonable planning horizons. The strategic 

planning time frame is three years. This is 

long enough to avoid the truncated nature of 

one-year planning, but not too long for the 

fast-changing world in which the Peace Corps 

operates.

•	 Right level of detail at the right time. The system is iterative, with macro-planning and budgeting occurring throughout the process and 

micro-planning and budgeting occurring near 

the start of each fiscal year.

•	 Institutionalized vertical and horizontal communication. The system prescribes agency integration, since each part of the organization uses 

the same basic system.

•	 Current operations costing. Pricing out current 

operations provides managers with valuable information on the resources needed to continue 

at current levels before they begin to consider 

increases or decreases to those levels. Current 

operations costing is a management and budget 

tool that does not require the continuation of 

all current activities. There are three major processes within the annual IPBS cycle. They are:

° Strategic plan and budget process. This 

is the stage where Peace Corps posts and 

offices, working with guidance from the 

Director, develop and/or update a threeyear strategic plan. The strategic plans 

include a strategy statement; a strategic 

analysis; and goal statements, objectives, 

performance indicators, and time frames. 

The budget document includes explanations of current operations, proposed 

enhancements, and reductions to current 

operations, including changes in staffing 

levels, major new initiatives, major capital 
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investments, and projections of Volunteer 

levels for three years forward. Posts and 

offices then submit the plan and related 

requests for budget enhancements and/or 

reductions over the next two years to their 

regional and associate directors for review, 

who then present summary strategic plans 

and requests for budget enhancements 

and/or reductions to the Director. Based on 

these presentations, and with input from 

agency senior staff, the Director makes 

internal planning and budget decisions 

for the upcoming fiscal year and provides 

guidance to prepare the OMB submission 

for the following year. The OMB submission is presented in the format that follows 

the Government Performance and Results 

Act with goals and objectives linked to budget and full-time equivalents. Regional and 

associate directors then inform the posts 

and offices of decisions.

° Operating plan and budget formulation.

Based on the feedback and decisions from 

their regional and associate directors, each 

post and office prepares a detailed operating plan and budget for the upcoming fiscal 

year. The plan takes the goals and objectives of the strategic plan and focuses on 

the next 12 months. This detailed operating 

plan is not forwarded, but remains at post 

or in the individual offices for execution. 

The detailed budget is forwarded for associate and regional director review, and 

regional and major office budgets are summarized for agency review. The Director, 

with senior staff input, makes any new 

resource allocation decisions required. The 

fiscal year financial and reporting processes 

begin.

° Plan and budget review. Two planning and 

budget reviews occur during each fiscal 

year. These provide a brief update on progress in accomplishing goals and allow for 

mid-course corrections, if needed. The budget review focuses on budget execution and 

proposed reprogramming. Review occurs at 

the regional and associate director level and 

at the agency director level. In addition, a 

formal budget closeout review is conducted 

each November.

In concert with IPBS, the Peace Corps also requires 

overseas posts to develop plans for their Volunteer 

projects that describe the goals, objectives, and lifespan of each project. The status of each project is reviewed each December. Each project’s strengths and 

weaknesses are assessed, and the plan is reaffirmed 

or altered based on lessons learned.

This year’s three-year (FY 2006–2008) planning 

process began in the spring with the issuance of the 

Director’s guidance. In addition to reaffirming the 

agency’s mission and goals, the directive addressed 

the impact of—and planned for the heightened focus 

on—safety and security of Volunteers and staff. The 

offices then aligned their individual plans to the 

agency’s overall direction and each IPBS submission 

was presented to the Director and reviewed. Upon 

concluding these reviews, each overseas post and 

office assembled its respective performance plans for 

the coming strategic plan period (FY 2003–2008) 

with emphasis on defining the outcome and performance goals with accompanying performance 

indicators. 

In this capacity-building approach, the agency helps 

individuals, service providers, organizations, and 

communities identify and address their needs. This 

is a major thrust of the Peace Corps’ work at the 

grass-roots level. These monitoring and evaluation 

efforts should capture how many of these entities 

are involved in activities sponsored by the Peace 

Corps and in what ways. All core criteria under this 

management agenda standard are being addressed, 

and they will be strengthened by the full implementation of the agency’s newly developed financial budget and financial management systems. 

The Director has also established the interoffice 

QSIP to measure strategic outcomes through the 

Peace Corps Volunteer survey. QSIP complements 
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the agency’s strategic plan under GPRA by helping 

to determine if performance goals and plans 

produce improved quality operations and service. 

For example, each office’s strategies under GPRA 

are designed to support, complement, or enhance 

the agency’s strategic goals. These goals drive how 

the Peace Corps operates and performs. Offices 

determine that they need to, for instance, conduct 

certain training or provide certain services to meet 

the GPRA goals. QSIP allows the Peace Corps 

to measure whether these plans work by asking 

for feedback from Volunteers about the quality of 

their experiences. Additionally, QSIP developed 

quality statements and performance indicators 

for recruitment and placement, programming and 

training, Volunteer support, third-goal and domestic 

activities, and management and administration. 

The main vehicle to evaluate progress in these areas 

is the biennial Peace Corps Volunteer survey. This 

survey is completed by most serving Volunteers, 

so it is a useful source of feedback for the agency to 

track its progress. 

The overall integrated process ensures that management can provide the right people with the right information, in the right format, at the right time. The 

inclusion of all the stakeholders of the Peace Corps’ 

mission (the right people) in data collection, analysis, 

and sharing of results increases the likelihood that 

those results will be applied and used in current 

operations and in the future. The right information

is the result of continually assessing what data are 

meaningful, useful, and appropriate, and ensuring 

that both the data and any follow-up analyses are 

communicated in a language and the right format

to allow stakeholders to do something with them. 

Finally, the right time for the exchange is critical to 

moving ahead and converting past performance—

and the measurements of that performance—into 

higher levels of achievement. 

Crisis Corps Volunteer helps with hurricane relief efforts in New Orleans
Performance resulTs

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Performance resulTs

In response to President Bush’s challenge to increase the size of the Peace Corps, the agency focused on growth in FY 2003 and FY 2004, achieving the highest number of Volunteers serving 

abroad since 1974, while providing a positive experience for Volunteers in a safe and secure environment. However, given the funds provided in the appropria tions process since FY 2003, the 

Peace Corps is no longer on track to double in size. This has required the Peace Corps to modify 

Strategic Goal 1. This document continues to present the four strategic goals the Peace Corps 

seeks to achieve from FY 2003 through FY 2008, with minor modifi cation. Each strategic outcome goal is followed by a set of measurable performance goals with accompanying means and 

strategies; a discussion of the relation ship to the agency’s annual performance goals in the performance budget; key factors potentially affecting achievement of goals; and the methods used to 

assess achievement. 

sTraTegic goals

o

strAtegic goAl 1

Assist interested countries with their identified 

needs by gradually expanding the existing number of 

Volunteers in the fi eld, at a rate consistent with funding levels and infrastructure support, up to 8,000 

Volunteers by September 30, 2008.

strAtegic goAl 2 

Improve the health and safety of Volunteers by improving the Volunteer healthcare satisfaction rate by 7 percent, from 75 percent in FY 2002 to 82 percent by FY 

2008; and increasing Volunteers’ perception of their 

personal safety where they live by 3 percent, from 86 

percent in FY 2002 to 89 percent by FY 2008. 

strAtegic goAl 3 

Improve Americans’ understanding of other peoples by 

increasing returned Peace Corps Volun teers’ (RPCVs’) 

visits to schools and community organizations by 29 

percent, from 7,000 in FY 2003 to 9,000 by FY 2008.

strAtegic goAl 4 

Reduce the Peace Corps’ overall response time for 

those applying to the Peace Corps by 5 percent, from 

223 days in FY 2003 to 212 days by FY 2008. 
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performance results

performance results

o

Strategic Goal 1:

Assist interested countries with their identified needs by gradually expanding the existing 

number of Volunteers in the field, at a rate consistent with funding levels and infrastructure 

support, up to 8,000 Volunteers by September 

30, 2008.

Outcome Goals:

1.1 Maintain the approximate number of 

Volunteers in the field from the FY 2003 

level of 7,533 to 8,000 (6.2 percent) by FY 

2008, assuming full funding for FY 2005 

and future requests, and incrementally 

expand Volunteer programming to include 

the development of innovative responses to 

natural disasters and humanitarian crises. 

1.2 Increase the combined number of 

applications to the Peace Corps from underrepresented ethnic and age groups from 

19 percent to 25 percent by FY 2008 in 

order to provide Volunteers to interested 

countries that better reflect American 

diversity. 

1.3 Reduce overall Volunteers’ 12-month 

early termination (ET) rate by 2.5 percent 

from the FY 2003 level of 11.6 percent to 

9.1 percent by September 2008 through 

improved matching of Volunteers’ skills 

to primary assignment, and improved 

satisfaction rate of Volunteer health and 

safety.

Performance Goal 1.1.1.

Incrementally increase in subsequent 

performance years Volunteers/trainees on 

board from the FY 2003 level of 7,533 to 

7,803 (3.6 percent) by FY 2005.

	 FY 2004 Goal	 FY 2004 Actual

7,803 7,81011

Results and Analysis

In FY 2005, the Peace Corps not only achieved, but 

surpassed, the goal of 7,803 Volunteers in the field. 

With 7,810 Volunteers and trainees on board, the 

Peace Corps reached the highest Volunteer levels in 

30 years. However, depending on appropriations 

levels and other trends, the agency may face challenges in future years in maintaining the growth 

in Volunteer numbers. Peace Corps will continue to 

strive to find new ways to expand its presence and 

increase Volunteer activity in the assisted countries. 

The Peace Corps continues to broaden the impact 

that Volunteers have on the men and women of their 

host countries. 

11	 See note 1.
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performance results

Performance Indicators 1.1.1. FY 2005 Target FY 2005 Actual

i. New country entries 1 0

ii. New country assessments 3 3

iii. Percentage of focus countries participating in the 

President’s Emergency Plan for AIDS Relief 90% 100%

iv. Number of Crisis Corps Volunteers responding

to natural disasters or humanitarian crisis12 65

62 CCVs

+ 134 FEMA

+ 20 Emergency 

Plan

v. Overall traffic to website 7.3 million 7.9 million

vi. Online applications completed 10,300 9,777

vii. Increase number of inquiries originating from website 155,000 137,988

viii. Rate of applications started vs. submitted 22.5% 17%

ix. Value of earned/donated media based on $250k cost to 

produce (millions of dollars) $5 $13.5

12	 See Note 1. Additionally, these numbers reflect the total number of CCVs that served throughout the fiscal year.

Environmental Volunteers work on water sanitation project in Mexico
28

The Peace Corps | performance and accountability report | fiscal year 2005

management’s discussion and analysis

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The Peace Corps | performance and accountability report | fiscal year 2005

performance results

Results and Analysis

The Peace Corps continues to receive new requests 

and perform assessments as it works to broaden 

its mission and deepen the impact Volunteers have 

on the men and women of their host countries. 

Evidence suggests that there is an increasing demand for Peace Corps and the programs it provides 

foreign countries, which support the goal of increasing the number of Volunteers in its ranks and the 

activities they perform. The agency successfully 

completed three new country assessments; however, 

decisions to enter these countries were deferred until 

a determination could be made regarding the full 

impact of Hurricanes Katrina and Rita relief efforts 

on FY 2006 appropriations.

The Peace Corps is participating in the President’s 

Emergency Plan for AIDS Relief at all nine posts13

that are working in the Emergency Plan focus countries.14 Additionally, the Peace Corps expanded its 

participation in the Emergency Plan through programs in nine other bilateral countries. This participation is enabling the agency to enhance and expand 

its contributions to the battle against AIDS.

During FY 2005, the Peace Corps continued to see 

an increase in traffic to its Internet site. The international climate continues to increase Americans’ 

awareness of global issues. The Peace Corps is a key 

means for Americans to exercise their sense of service and ambassadorship overseas, and the successful reception of the marketing campaign, Internet 

resources, and related materials are key indicators of 

that success. 

Applications made online were lower than targeted. 

This corresponds to an overall decrease in the 

number of applications received during FY 2005. 

Nevertheless, the Peace Corps received nearly three 

times as many applications needed for the more 

than 4,000 individuals that were accepted into the 

Peace Corps.

The agency found FY 2005 to be a tough recruiting year due to a vibrant economy and low unemployment numbers. In particular, recent college 

graduates had greater employment options and 

opportunities than has been the case in several 

years. The Peace Corps has found that such factors 

tend to decrease applications. Moving forward, the 

Peace Corps plans to track individuals through the 

online application process and provide them with 

updates, reminders, and assistance on their applications. Additionally, the agency is building upon its 

community outreach efforts, targeting audiences 

of diverse ages including those people approaching 

retirement. 

The Communications Office launched the agency’s 

first-ever, national out-of-home public service announcement (PSA) campaign, which garnered

$4.8 million in donated media placements and 

commitments in 27 markets. This office also 

launched a new PSA created to appeal to urban 

format radio stations, significantly increasing total 

audience size and outreach to African Americans. 

The agency continues to aggressively market its 

existing television, radio, and print PSAs, including customizing the latter to fit targeted national 

magazines. Media outlets appreciate the look, feel, 

and message of the advertising, which, combined 

with the agency’s mission, has resulted in strong 

ongoing media support.

13 These Peace Corps posts include: Botswana, Guyana, Kenya, Mozambique, Namibia, South Africa, Tanzania, Uganda, and Zambia.

 14	 The Emergency Plan has identified 15 focus countries that include, in addition to the nine countries listed above: Ethiopia, Haiti, Ivory Coast,

Nigeria, Rwanda, and Vietnam.
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The Peace Corps | performance and accountability report | fiscal year 2005

performance results

Performance Goal 1.2.1.

Increase the combined number of 

underrepresented ethnic and age groups 

applying to the Peace Corps from 19 percent 

to 21 percent by FY 2005.

	 FY 2005 Goal	 FY 2005 Actual

21% 24.5%

Performance Indicators 1.2.1. FY 2005 Target FY 2005 Actual

i. Percentage of minority trainees Measured on actual data only. 

No targets established. 15.8%

ii. Recruitment and support efforts 

focusing on applicants over age 50, 

diverse ethnicities, backgrounds, and 

level of education

10 diverse conferences;

5 panel presentations 14/7

iii. Percentage of Volunteers over age 50 Measured on actual data only. 

No targets established. 5.9%

iv. Visitors to website who access 

minority recruitment pages and/or 

scarce skills, family pages

350,000 415,802 

v. Collateral pieces used (i.e., all 

marketing material printed by Peace 

Corps) that target diverse audiences

1.2 million 533,252

vi. Articles placed in newspapers and 

other media that target diverse 

audiences

150 155

Results and Analysis

The Peace Corps, while gradually expanding the 

number of Volunteers to meet the President’s challenge, is also attempting to increase the number of 

underrepresented ethnic and age groups applying to 

the Peace Corps. This effort ensures that the Peace 

Corps truly reflects the diverse face of the United 

States. 

The Peace Corps exceeded its FY 2005 target, even 

though overall applications were lower than expected. The Peace Corps instituted several programs 

to continue progressing toward this objective. More 

and more underrepresented audiences are being 

reached in media and marketing. Additional website 

content speaks to diverse audiences, and further 

gains in this performance goal should continue in 

upcoming years.
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performance results

Results and Analysis

The Peace Corps places significant importance on 

attracting underrepresented ethnic and age group 

applicants. The redesign of the Peace Corps Internet 

site, additional content geared towards underrepresented audiences, and the overall Peace Corps 

marketing campaign, have attracted many new and 

repeat visits to the portions of the Internet site devoted to minority groups. 

The agency continues to create new content and 

promotional vehicles to attract additional visits to 

its website, such as new “mini-sites,” content in flash 

format, and electronic tools to help recruiters drive 

potential candidates to the website. Innovations 

like this helped contribute to the agency exceeding 

its goal for total visitors to its website pages devoted 

to minority and/or scarce skills and family pages.

The target for “collateral used” was not met. 

However, the Peace Corps designed all recruitment 

materials under the “Life is Calling” campaign to 

include representation of and messages to diverse 

audiences. Thus, the need for specially targeted 

materials is less than in previous years. Additionally, 

the Peace Corps noticed a greater demand from 

potential applicants for the Peace Corps catalog and 

the Great Adventure books. This demand led to the 

production of 140,000 catalogs and 25,000 Great

Adventure books. 

In response to this change in demand, the Peace 

Corps is developing a mini-version of the catalog as 

a lower-cost option that should perform as effectively as the more expensive catalog, stretching the 

recruitment material budget further. 

The Peace Corps | performance and accountability report | fiscal year 2005

Performance Goal 1.3.1.

Reduce the overall 12-month Volunteer

early termination (ET) rate by 1.5 percent

from FY 2003 level of 11.6 percent to

10.6 percent by September 2005.

	 FY 2005 Goal	 FY 2005 Actual

10.6% 11.9%15

Results and Analysis

The historical early termination (ET) rate since 1961 

has been on a downward trend. The current ET rate 

is well below the last high (20.5 percent in 1970) and 

the average ET rate of 13.3 percent. While the overall ET rate did not match the goal, it must be noted 

that three posts were suspended this past fiscal year. 

Volunteers in such situations have the choice to take 

a nondisciplinary administrative separation or be 

transferred to another post. Any Volunteer who does 

not complete two full years of service is counted 

as an ET. Thus, posts that have been suspended 

(which occur for reasons beyond the control of the 

Volunteer) result in an inflated ET rate. 

Peace Corps developed a new survey instrument 

to collect additional data not previously available. 

The survey gathers data on reasons behind why 

Volunteers and trainees terminate early. This information provides feedback to the posts and headquarters about the reasons behind the ET rate, and 

has been helpful in analyzing the issue.

In addition, analysis of Peace Corps’ historical ET 

rates suggest that it may not be possible or even desirable to reduce the rates much lower than current 

levels. 

15 Twelve-month ET rate for period ending September 30, 2005. ET rate excluding posts affected by suspensions = 10.9 percent in FY 2005.

The agency plans to review the methodology for determining the ET rate to ensure the data collected provide a meaning ful basis for

analysis.
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The Peace Corps | performance and accountability report | fiscal year 2005

performance results

Performance Indicators 1.3.1. FY 2004 

Target

FY 2004 

Actual

i. Percentage of sites described as “very well,” “well,” or “adequately” 

prepared in the biennial Volunteer survey 16 NA NA

ii. Percentage of skills requests that align with available applicants 90% 81%*

iii. Percentage of Peace Corps project plans complete and current 75% 73%

iv. Percentage of Peace Corps projects and training programs 

reviewed annually 95% 95%

v. Number of field-based project reviews and evaluations 30 18

vi. Number of project and training technical assistance events 

for posts 105 111

Results and Analysis

Although the skills match target was not 

achieved, the Peace Corps still hit an 81 percent 

match, according to Volunteers in the biennial 

survey. This goal remains an important indicator relating to Volunteers’ job satisfaction and 

overall satisfaction with their service. At the same 

time, countries request certain skills as many as 

18 months in advance, and their needs and/or 

job requirements can change during this time 

frame. This tendency creates challenges for the 

agency in meeting the skills match targets, which 

the agency continues to assess and evaluate.

The Peace Corps has an ongoing process to review 

and update project plans at post. Some project

plans continue to be under revision and therefore 

the percentage complete narrowly missed the

FY 2005 target. 

16 Biennial survey—Volunteer survey is conducted every two years (last conducted in 2004).

The current mechanism for tracking the number of 

project reviews and evaluations is based on evaluations conducted by headquarters staff. The number 

fell short of the target due, in part, to unplanned 

post suspensions in which scheduled reviews could 

not be completed. The agency is aware that some 

evaluations are being conducted directly by fieldbased staff; therefore, a system is being developed to 

also capture these efforts. 

Additional funding helped the number of posts receiving project and training technical assistance to 

surpass the FY 2005 target.

*	 Based upon biennial Volunteer survey distributed to PCVs in 2004.
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The Peace Corps | performance and accountability report | fiscal year 2005

performance results

Performance Goal 2.1.1.

Incrementally increase the percentage of 

respondents to the biennial Peace Corps 

Volunteer survey indicating feeling “well” or 

“completely” satisfied with their in-country 

healthcare by 5 percent from FY 2003 level 

of 75 percent to 80 percent by September 

2006.17

	 FY 2005 Goal	 FY 2005 Actual

N/A N/A

Strategic Goal 2:

Improve the health and safety of Volunteers by 

improving the Volunteer healthcare satisfaction 

rate by 7 percent, from 75 percent in

FY 2002 to 82 percent by FY 2008; and increasing Volunteers’ perception of their personal safety 

where they live by 3 percent, from 86 percent in 

FY 2002 to 89 percent by FY 2008.

Outcome Goals:

1.1 Increase the percentage of Peace Corps 

Volunteers indicating feeling “well” or 

“completely” satisfied with their in-country 

healthcare from FY 2002 level of 75 percent 

to 82 percent by September 2008. 

1.2 Increase the percentage of Peace Corps 

Volunteer survey responses indicating that 

Volunteers feel safe “most of the time” where 

they live from FY 2002 level of 86 percent 

to 89 percent by September 2008.

The Peace Corps | performance and accountability report | fiscal year 2005

Results and Analysis 

The last survey was completed in FY 2004. The next 

biennial survey will be completed in FY 2006.

17	 See note 16.
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The Peace Corps | performance and accountability report | fiscal year 2005

performance results

Performance Indicators 2.1.1. FY 2005

Target

FY 2005

Actual/Estimate

i. Percentage of Volunteers medically evacuated to 

Washington, D.C., reporting they are satisfied with 

their medical evacuation care as measured by the 

medevac survey

90% 93%

ii. Percentage of Volunteer respondents reporting health 

training as “effective” or “very effective” as measured by 

the biennial Volunteer survey

N/A N/A

iii. Incidence of vaccine-preventable diseases (e.g., hepatitis A 

& B). Measure is in cases per 100 Volunteer/trainee years

Target 

< 0.05 0.05

iv. Incidence of falciparum malaria in Africa region. Measure is 

in cases per 100 Volunteer/trainee years

Target 

< 6.0 1.33

Results and Analysis

The health, safety, and security of every Volunteer is 

the Peace Corps’ highest priority and is reflected as 

such in the Peace Corps’ strategic plan. 

The results of the medevac surveys were 3 percent 

higher than the target. A medical evacuation is a 

stressful time, and Peace Corps does everything it 

can to ensure the safety and health of its Volunteers. 

Overall, 59 percent reported to be “very well satisfied” and 34 percent reported to be “well satisfied” 

with the overall quality of their medevac experience. 

The agency achieved its goal for the incidence of vaccine-preventable disease. Overall, the agency had 

three cases (out of more than 6,400 Volunteer years).

The incidence of falciparum malaria is well below 

the 2005 target because of the comprehensive malaria education given to the Volunteers by Peace 

Corps medical officers, and the compliance to that 

training by the Volunteers, including the consistent 

use of malaria prophylaxis.
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The Peace Corps | performance and accountability report | fiscal year 2005

management’s discussion and analysis

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The Peace Corps | performance and accountability report | fiscal year 2005

performance results

Performance Goal 2.2.1.

Incrementally increase the percentage of 

respondents to the biennial Peace Corps 

Volunteer survey indicating that Volunteers 

feel safe most of the time at home by two 

percent from FY 2003 level of 86 percent to 

88 percent by September 2006.18 

	 FY 2005 Goal	 FY 2005 Actual

N/A N/A

Results and Analysis

Not applicable.

18	 See note 16.

Environmental Volunteer (left) discusses water sanitation with host country national in Mexico
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The Peace Corps | performance and accountability report | fiscal year 2005

management’s discussion and analysis

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The Peace Corps | performance and accountability report | fiscal year 2005

performance results

Results and Analysis

The Peace Corps places the safety and security of 

its Volunteers as a key priority, with a prominence 

in the strategic plan for these issues. The Office of 

Safety and Security is responsible for several training 

and review programs. Each region also continues 

this emphasis for the Volunteers. Fiscal year 2005 

reports indicated that this vigilance has been meaningful and successful. 

Performance Indicators 2.2.1. FY 2005

Target

FY 2005

Actual

i. Percentage of Volunteer pre-service training programs 

including safety training 100% 100%

ii. Percentage of Volunteers demonstrating 10 safety and 

security competencies at end of pre-service training 100% 100%

iii. Percentage of posts undergoing safety and security 

assessments 85% 86%

iv. Percentage of posts receiving emergency action 

plan training 90% 100%

v. Percentage of posts testing emergency action plans at least 

once a year

100% 100%

vi. Percentage of posts complying with all sections of MS 270, 

beginning July 2003 95% 90%

vii. Percentage of Volunteer respondents reporting the 

safety and security portion of their pre-service training as 

“adequate,” “effective,” or “very effective” as measured by the 

biennial Volunteer survey

N/A N/A

viii. Percentage of Volunteer respondents reporting they were 

“somewhat,” “considerably,” or “completely” satisfied with 

support provided by Peace Corps staff for safety and 

security, as measured by the biennial Volunteer survey

N/A N/A
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The Peace Corps | performance and accountability report | fiscal year 2005

performance results

Strategic Goal 3:

Improve Americans’ understanding of other 

peoples by increasing returned Peace Corps 

Volunteers’ (RPCVs’) visits to schools and 

community organizations by 29 percent, 

from 7,000 in FY 2003 to 9,000 in FY 2008.

Outcome Goal:

3.1 Increase RPCV visits to schools and 

organizations by 29 percent from 

FY 2003 level of 7,000 to 9,000 by 

September 2008.

Performance Goal 3.1.1.

Increase RPCV visits to schools and 

organizations by 800 from the FY 2003 

level of 7,000 to 7,800 by September 

2005.

	 FY 2005 Goal	 FY 2005 Actual

7,800 12,264

Results and Analysis

The agency surpassed its FY 2005 goal significantly 

because of an improved reporting mechanism to 

capture RPCV interactions with schools and organizations around the country. While previous 

reporting focused solely on Peace Corps Week activities, the regional recruiting offices are now able 

to highlight other Peace Corps-supported activities 

that include RPCV interaction with the American 

public. Such activities include RPCVs giving talks 

on campuses and at career fairs, in elementary and 

secondary schools, and at cultural and community 

fairs. The total also includes RPCV Peace Corps 

Fellows who interact with schools and communities as a part of their program activities. RPCVs 

are heavily engaged in educating the American 

people in many other ways, and the Peace Corps 

is taking steps to better capture these data.

Crisis Corps Volunteer helps with hurricane recovery efforts in New Orleans
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The Peace Corps | performance and accountability report | fiscal year 2005

management’s discussion and analysis

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The Peace Corps | performance and accountability report | fiscal year 2005

performance results

Performance Indicators 3.1.1. FY 2005

Target

FY 2005

*Actual*

i. RPCVs participating in Peace Corps Week activities 7,800 7,062

ii. RPCVs participating in career events 950 807

iii. RPCVs e-mailed the RPCV newsletter 10,000 9,322

iv. Percentage of active Volunteers (not trainees) during the 

year participating in the Coverdell World Wise Schools 

(CWWS) one-to-one Correspondence Match program

53% 54%

v. Average visitors per month to the CWWS section of the 

Peace Corps website 500,000 486,000

Results and Analysis

The Peace Corps witnessed a modest but steady 

growth in RPCV participation in Peace Corps 

Week activities (the main project where RPCVs visit 

schools). This growth represents the highest participation levels ever, even though the target of 7,800 

was not met. 

Improvements in gathering and maintaining contact 

information will allow the Peace Corps to organize 

activities for, and collect information from, Peace 

Corps Volunteers. Technology should continue to 

make this easier, so improvements in meeting this 

goal are expected.

Fewer RPCVs than anticipated participated in a 

variety of career events. This shortfall was largely 

due to the discontinuation of monthly “career brown 

bag lunches.” In previous years, approximately 250 

people participated in those events annually. 

The Peace Corps exceeded its goal regarding

e-mailing the RPCV newsletter by about 10 percent, 

showing a strong success in its efforts to build and 

improve the database of e-mail addresses of the 

RPCV community.

The target for average number of visitors to the 

CWWS website as measured by page-view figures 

was developed using information from one month 

during the academic year. In fact, the average

number of visitors per month exceeded expectations 

during each month of the academic year, yet the

FY 2005 result reflects that there are fewer visits 

during summer months when school is not in 

session. 
38

The Peace Corps | performance and accountability report | fiscal year 2005

management’s discussion and analysis

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The Peace Corps | performance and accountability report | fiscal year 2005

performance results

Strategic Goal 4:

Reduce the Peace Corps’ overall response time for 

those applying to the Peace Corps by 5 percent, 

from 223 days in FY 2003 to 212 days by 

FY 2008.

Outcome Goal:

1.1 Reduce overall Peace Corps applicant 

response time by 5 percent by September 

2008 through evaluation and integration 

of new technology and recruitment and 

placement of staff structures.

Performance Goal 4.1.1.

Reduce overall response time to 

applicants by 2 percent from FY 2003 

level of 223 days to 219 days by FY 2005.

	 FY 2005 Goal	 FY 2005 Estimated

219 261

Results and Analysis

The FY 2005 overall response time is calculated 

based on data from the Peace Corps Volunteer database system. During FY 2005, analysis of the data 

showed that there are several issues that need to be 

addressed. The most important is that the current 

system does not overwrite the dates of applications 

(and other stages). As such, if someone were to pick 

up the application process after having applied in 

the past, the original application date will still be 

used. This stop-and-go approach by the applicant 

can inflate the overall response time, creating an 

inaccurate view of the agency’s performance. The 

agency also has found that some applicants stop the 

process for reasons of their own without canceling 

their application. Such cases will also inflate the 

agency’s overall response time. These issues, as well 

as those discussed in the indicators below, will be 

examined during FY 2006.

Education Volunteer with youth in Turkmenistan
39

The Peace Corps | performance and accountability report | fiscal year 2005

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The Peace Corps | performance and accountability report | fiscal year 2005

performance results

Performance Indicators 4.1.1. FY 2004

Target

FY 2004

*Actual

i. Percentage of applicants who complete their Volunteer 

applications over the Internet 77% 83%

ii. Percentage of applicants who complete their health status 

review for medical screening over the Internet 78% 83%

iii. Application to nomination (number of days) 64 68

iv. Nomination to medical qualification (number of days) 74 143

v. Medical qualification to invitation (number of days) 47 49

vi. Invitation to entrance on duty (number of days) 34 93

Results and Analysis

Several issues concerning these indicators emerged 

over the past fiscal year. The targets originally established in FY 2003 were found to be based on 

irregular data, resulting in unrealistic goals. The 

process used to report these indicators has now been 

standardized. 

A key area of concern was that close to one-third of 

the time period for applications is in the hands of 

applicants when they are completing their medical 

data. This, on average, accounts for 85 out of the 

253 days reported in this update. This area is largely 

out of the control of the Peace Corps and dependent 

upon the applicant. 

The application process is fairly complex. It can 

involve the gathering and submission of many different documents, and applicants may need to undergo several medical tests. As a result, timeliness 

of individual applicants varies widely. In addition, 

the Volunteer database system does not recognize 

whether an applicant applies twice and will count 

days from the first application date to the final medical qualification. 

The Peace Corps is finding that the target for 

“Invitation to Entrance on Duty” is heavily influenced by an applicant’s need to have enough time 

to prepare for a two-year commitment to the Peace 

Corps. Most invitees feel that one month is not sufficient. In addition, applicants are invited to the Peace 

Corps based on the availability of programs, the 

timing of which may shift from year to year. 
financial rePorT

Y
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The Peace Corps | performance and accountability report | fiscal year 2005

financial report

The past three fiscal years were a time of transition with respect to financial systems and personnel, both at headquarters and at posts. The agency’s efforts in FY 2003 focused on tailoring 

Oracle Federal Financials (Odyssey) software for the Peace Corps environment. Regrettably, 

the Peace Corps realized the extent of the deficiencies in the legacy systems too late to take substantive corrective action before conversion.

This office expended extensive effort during FY 2004 in researching U.S. Treasury cash imbalances that existed in the legacy system. Most of these imbalances were identified and resolved 

and the corresponding adjustments to open obligations, advances, receivables, and payables 

were fully documented and recorded in Odyssey. 

FY 2005 was a year of continued transition for financial management within the Peace Corps. 

The agency worked assiduously to lay the foundation for achieving the agency’s ultimate goal 

of receiving an “unqualified” overall audit opinion within the next four years. This effort to improve data integrity and regularly produce reliable, relevant, and timely financial reports facilitating sound and timely financial management decisions will encompass:

• An intensified internal control/quality assurance program. 

• Streamlined budget formulation, budget execution, and payment processes and an 

organizational structure that concurrently incorporates maximum efficiencies and 

segregation of duties.

• Increased use of financial management systems’ functionality.

• Current policy, procedural, and technical documentation.

• Development and monitoring of action plans to correct deficiencies identified by internal 

reviews, the Inspector General, and independent auditors.

• Improved customer service and interoffice communication.

• Increased use of electronic payments.

• Validated position descriptions for financial management personnel that will include 

identification of requisite core competencies.

• Increased agency-wide functional and technical training that, at a minimum, addresses 

the requisite core competencies.

LETTER from the chief financial officer

Y
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The Peace Corps | performance and accountability report | fiscal year 2005

financial report

Significant progress has occurred in the areas of financial management, organizational structure, staffing, technology, documentation, and tools needed to achieve these goals. These include:

• Reorganizing the Office of the Chief Financial 

Officer (OCFO), formerly known as the Office 

of Planning, Budget, and Finance. The interim 

reorganization changed the structure from three 

directors and three budget integration teams 

to seven directors, each with a clearly defined 

function. The final reorganization is dependent 

on the results of a recently started business 

process analysis.

• Adding a program analyst position to the 

executive office. This analyst will document 

and analyze as-is business processes and 

work with senior management to recommend 

revisions where appropriate, in coordination 

with ongoing agency enterprise architecture 

activities.

• Creating the position of Director of Performance 

Reporting and Compliance within the OCFO. 

• Engaging an independent auditor to evaluate 

progress in financial processes.

• Initiating a numbered CFO Bulletin e-mail 

communication link to country directors 

and administrative officers at the posts. Ten 

bulletins covering a wide range of subjects were 

sent by the end of August 2005, educating 

the agency’s client base on sound financial 

management procedures. 

• Updating the Overseas Financial Management

Handbook, which included disseminating 

an electronic version and supplementing the 

handbook with an online desktop financial 

manual.

• Conducting a survey to determine posts’ 

accountability for imprest fund balances, intransit payments, etc.

• Establishing a baseline value and a management 

process to capture capital assets and related 

depreciation.

• Issuing OCFO position papers covering 

accounting and reporting policies.

Education Volunteer reads a story to South African children
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The Peace Corps | performance and accountability report | fiscal year 2005

financial report

These efforts have resulted in several improvements, including:

• Meeting financial reporting deadlines and 

generating quarterly financial reports based on 

the U.S. Standard General Ledger.

• Implementing or making scheduled progress 

on 14 of the 18 agreed-upon financial 

recommendations from the FY 2004 audit. 

• Implementing or making scheduled progress

on all six of the IT recommendations from the 

FY 2004 audit. 

• Including the value of fixed assets on a financial 

statement for the first time.

• Significantly improving the accuracy of the 

monthly statement of transactions, contributing 

to more current reconciliations of the fund 

balance with the U.S. Treasury and its 

corresponding undisbursed appropriation 

account ledger.

• Accelerating the identification and resolution of 

items in the statement of differences.

• Regularly correcting general ledger anomalies 

and incompatibilities and, where applicable, 

correcting the system logic that caused the 

condition. 

The FY 2004 audit and the two reviews of processes identified several weaknesses. Those directly involving financial processes and requiring corrective action during FY 2005 and thereafter, as well as those weaknesses not directly involving financial processes, are reported in the 

appendices.

Based on the weaknesses that still exist, more effort is required before the agency can provide 

reasonable assurance that internal control over financial reporting is operating more effectively. 

The Peace Corps still has uncorrected weaknesses in the areas of documenting current policies, 

procedures, and processes; performing reconciliations; validating open transactions; and maintaining supporting documentation for open and closed transactions. The OCFO is confident 

that these open weaknesses will be corrected during the next fiscal year and the agency will be 

able to provide reasonable assurance that internal control over financial reporting is operating 

effectively on next year’s report.

George A. Schutter III, CPA, CPCM

Chief Financial Officer
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The Peace Corps | performance and accountability report | fiscal year 2005

financial report

Peace Corps

Consolidated Balance Sheet

As of September 30, 2005

(In Thousands)

2005 2004

Restated

Assets

Intragovernmental Assets

Fund Balance With Treasury (Note 3) $ 127,662 $ 120,775

Accounts Receivable (Note 5) $ 1,712 $ 1,127

Total Intragovernmental Assets $ 129,374 $ 121,902

Assets With the Public

Cash, Foreign Currency, and Other Monetary Assets (Note 4) $ 139 $ 134

Accounts Receivable (Note 5) $ 39 $ 31

General Property, Plant, and Equipment (Note 6) $ 41,697 $ -

Other

Prepaid Volunteer Living Allowances (Note 7) $ 3,668 $ 3,665

Other Assets (Note 8) $ 660 $ 632

Total Assets With the Public $ 46,203 $ 4,462

Total Assets $ 175,577 $ 126,364

Liabilities

Intragovernmental Liabilities 

Accounts Payable $ 2,035 $ -

Other (Note 10) $ 1,229 $ 1,445

Unfunded FECA Liability (Note 9) $ 24,606 $ 24,553

Total Intragovernmental Liabilities $ 27,870 25,998

Liabilities With the Public

Accounts Payable $ 14,266 $ 6,161

Federal Employee and Veterans Benefits (Note 9) $ 126,651 $ 125,709

Other Liabilities With the Public

Other Liability (Note 10) $ 125 $ -

Other Liability - Non-Entity Funds $ 25,720 $ 23,888

Other Unfunded Employment Related Liability (Note 9) $ 6,796 $ 13,973

Accrued Funded Payroll and Leave $ 3,144 $ 2,880

Unfunded Annual Leave (Note 9) $ 6,534 $ 3,216

Total Liabilities With the Public $ 183,236 $ 175,827

Total Liabilities $ 211,106 $ 201,825

Net Position

Unexpended Appropriations $ 84,896 $ 95,451

Cumulative Results of Operations $ (120,425) $ (170,912)

Total Net Position $ (35,529) $ (75,461)

Total Liabilities and Net Position $ 175,577 $ 126,364

Peace Corps

Consolidated Statement of Net Cost

For the Fiscal Year Ended September 30, 2005

(In Thousands)

2005 2004

Program Costs:

Gross Costs $ 320,727 $ 494,909

Less: Earned Revenues (Note 14) $ 3,325 $ 4,279

Net Program Costs $ 317,402 $ 490,630

Costs Not Assigned to Programs $ - $ -

Less: Earned Revenues Not Attributed to Programs $ - $ -

Net Cost of Operations $ 317,402 $ 490,630

The accompanying notes are an integral part of the statements.
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Peace Corps

Consolidated Statement of Net Cost

For the Fiscal Year Ended September 30, 2005

(In Thousands)

2005 2004

Program Costs:

Gross Costs $ 320,727 $ 494,909

Less: Earned Revenues (Note 14) $ 3,325 $ 4,279

Net Program Costs $ 317,402 $ 490,630

Costs Not Assigned to Programs $ - $ -

Less: Earned Revenues Not Attributed to Programs $ - $ -

Net Cost of Operations $ 317,402 $ 490,630

The accompanying notes are an integral part of the statements.
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Peace Corps

Consolidated Statement of Changes in Net Position

For the Fiscal Year Ended September 30, 2005

(In Thousands)

2005 2005 2004 2004

Cumulative Results of 

Operations

Unexpended

Appropriations

Cumulative Results 

of Operations

Unexpended

Appropriations

Beginning Balances $ (169,898) $ 94,453 $ (3,655) $ 99,358

Prior-Period Adjustments (+/-) $ 47,386 $ (2,475) $ - $ -

Beginning Balances, As Adjusted $ (122,512) $ 91,978 $ (3,655) $ 99,358

.

Budgetary Financing Sources:

Appropriations Received $ - $ 320,000 $ - $ 310,000

Other Adjustments (Rescissions, etc.) (+/-) $ - $ (10,502) $ (8) $ (2,543)

Appropriations Used $ 316,580 $ (316,580) $ 311,364 $ (311,364)

Transfers-In/Out Without Reimbursement $ (3,592) $ - $ (1,153) $ -

Other Financing Sources $ - $ -

Donations and Forfeitures of Property $ - $ - $ 7,885 $ -

Transfers-In/Out Without Reimbursement $ 1,804 $ - $ 853 $ -

Imputed Financing From Costs Absorbed by Others $ 4,697 $ - $ 4,448 $ -

Other $ - $ - $ (16) $ -

Total Financing Sources $ 319,489 $ (7,083) $ 323,373 $ (3,907)

Net Cost of Operations (+/-) $ (317,402) $ - $ (490,630) $ -

Ending Balances $ (120,425) $ 84,896 $ (170,912) $ 95,451

The accompanying notes are an integral part of the statements.
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Peace Corps

Consolidated Statement of Financing

For the Fiscal Year Ended September 30, 2005

(In Thousands)

2005 2004

Resources Used to Finance Activities

Budgetary Resources Obligated:

Obligations Incurred $ 317,499 $ 306,616

Less: Spending Authority from Offsetting Collections and Recoveries* $ 5,279 $ 5,022

Obligations Net of Offsetting Collections and Recoveries $ 312,220 $ 301,594

Less: Offsetting Receipts $ - $ -

Net Obligations $ 312,220 $ 301,594

Other Resources

Donations and Forfeitures of Property $ - $ 7,885

Transfers In/Out Without Reimbursement $ 1,805 $ 853

Imputed Financing from Costs Absorbed by Others $ 4,697 $ 4,448

Other Resources $ - $ (17)

Net Other Resources Used to Finance Activities $ 6,501 $ 13,169

Total Resources Used to Finance Activities $ 318,721 $ 314,763

Resources Used to Finance Items Not Part of Cost of Operations

Change in Budgetary Resources Obligated for Goods, Services and Benefits 

but Not Yet Provided $ 1,863 $ 8,711

Resources that Fund Expenses Recognized in Prior Periods $ 7,177 $ -

Resources that Finance the Acquisition of Assets $ 5,017 $ -

Other Resources or adjustments to Net Obligated Resources that do not affect 

Net Costs of Operations $ - $ (300)

Total Resources Used to Finance Items Not part of the Net Cost of Operations $ 14,057 $ 8,411

Total Resources Used to Finance the Net Cost of Operations $ 304,664 $ 323,174

Components of the Net Cost of Operations that Will Not Require or Generate 

Resources in the Current Period

Components Requiring or Generating Resources in Future Periods:

Increase in Annual Leave Liability $ 3,318 $ 3,216

Other (+/-) $ 1,245 $ 164,235

Total Components of Net Cost of Operations That Will Require or Generate 

Resources in Future Periods $ 4,563 $ 167,451 

Components Not Requiring or Generating Resources

Depreciation and Amortization $ 8,190 $ -

Revaluation of Assets or Liabilities (+/-) $ - $ (16)

Other (+/-) $ (15) $ 21

Total Components Not Requiring or Generating Resources $ 8,175 $ 5 

Total Components of the Net Cost of Operations that Will Not Require or Generate 

Resources in the Current Period 12,738 $ 167,456 

Net Cost of Operations $ 317,402 $ 490,630

Peace Corps

Consolidated Statement of Net Cost

For the Fiscal Year Ended September 30, 2005

(In Thousands)

2005 2004

Program Costs:

Gross Costs $ 320,727 $ 494,909

Less: Earned Revenues (Note 14) $ 3,325 $ 4,279

Net Program Costs $ 317,402 $ 490,630

Costs Not Assigned to Programs $ - $ -

Less: Earned Revenues Not Attributed to Programs $ - $ -

Net Cost of Operations $ 317,402 $ 490,630

The accompanying notes are an integral part of the statements.
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Peace Corps

Combined Statement of Budgetary Resources

For the Fiscal Year Ended September 30, 2005

(In Thousands)

2005 2004

BUDGETARY RESOURCES

Budgetary Authority:

Appropriation $ 320,000 $ 310,000

Unobligated Balance

Brought Forward, Oct 1 $ 23,081 $ 17,501

Spending Authority from Offsetting Collections (Gross)

Earned

Collected $ 4,926 $ 4,069

Receivable from Federal Sources $ (525) $ 1,127

Change in Unfilled Customer Orders

Advance Received $ (27) $ 29

Without Advance from Federal Sources $ 905 $ (203)

Subtotal $ 5,279 $ 5,022

Permanently Not Available

Cancellations of Expired and No-Year Accounts $ 7,945 $ 998

Enacted Reductions $ 2,560 $ 1,829

Total Budgetary Resources $ 337,855 $ 329,696

STATUS OF BUDGETARY RESOURCES

Obligations Incurred

Direct

Category A $ 314,001 $ 302,510

Reimbursable

Category A $ 3,498 $ 4,105

Subtotal $ 317,499 $ 306,615

Unobligated Balances

Apportioned:

Balance Currently Available $ 14,252 $ 9,673

Unobligated Balances Not Available

Other $ 6,104 $ 13,408

Total Status of Budgetary Resources $ 337,855 $ 329,696

RELATIONSHIP OF OBLIGATIONS TO OUTLAYS

Obligated Balance, Net as of October 1 $ 72,542 $ 76,892

Obligated Balance, Net, End of Period

Accounts Receivable $ 602 $ 1,127

Unfilled Customer Orders from Federal Sources $ 1,524 $ 618

Undelivered Orders $ 63,405 $ 65,246

Accounts Payable $ 19,219 $ 9,041

Outlays:

Disbursements $ 309,162 $ 310,042

Collections $ 4,899 $ 4,098

Net Outlays $ 304,263 $ 305,944

Less: Distributed Offsetting Receipts $ - $ -

Net Outlays $ 304,263 $ 305,944

The accompanying notes are an integral part of the statements.

Peace Corps

Consolidated Statement of Net Cost

For the Fiscal Year Ended September 30, 2005

(In Thousands)

2005 2004

Program Costs:

Gross Costs $ 320,727 $ 494,909

Less: Earned Revenues (Note 14) $ 3,325 $ 4,279

Net Program Costs $ 317,402 $ 490,630

Costs Not Assigned to Programs $ - $ -

Less: Earned Revenues Not Attributed to Programs $ - $ -

Net Cost of Operations $ 317,402 $ 490,630

The accompanying notes are an integral part of the statements.
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Note 1 Significant Accounting Policies 

a) Reporting Entity 

The Peace Corps was initially established by President John F. Kennedy pursuant to 

Executive Order 10924 on March 1, 1961, and was subsequently formalized by the Peace 

Corps Act of 1961. The Peace Corps is an independent agency within the executive 

branch of the United States government. 

The core mission of the Peace Corps is to promote world peace and friendship by making 

available to interested, less developed countries men and women of the United States 

qualified for service abroad and willing to serve, even under conditions of hardship if 

necessary. The Peace Corps’ goals are to help the people of interested countries in 

meeting their need for trained men and women; to help promote a better understanding of 

Americans on the part of the peoples served; and to help promote a better understanding 

of other peoples on the part of Americans. 

For the fiscal year ended September 30, 2005, the agency is presenting its first year of 

comparative financial statements prepared in conformity with federal accounting 

standards, reflecting the results of operations to support the Volunteers in countries 

served.

b) Basis of Presentation 

The financial statements present the financial position, the net cost of operations, and 

changes in net position along with budgetary resources and financing activities of the 

agency pursuant to the requirements of 31 U.S.C. 3515 (b). They have been prepared 

using Peace Corps’ books and records in accordance with agency accounting policies, the 

most significant of which are summarized in this note. The statements are in addition to 

the financial reports used to monitor and control budgetary resources, which are prepared 

from the same books and records. The statements are presented in accordance with the 

applicable form and content requirements of the Office of Management and Budget 

(OMB) Circular A-136, Financial Reporting Requirements, issued August 2005. The 

statements should be read with the realization that they are for a component of the U.S. 

Government, a sovereign entity. 

The Peace Corps’ accounting policies follow Federal Accounting Standards Advisory 

Board (FASAB) principles and other generally accepted accounting principles (GAAP) 

for the United States federal government.

The statements are subdivided in two categories: intragovernmental and public. The 

intragovernmental balances, revenues, and costs reflect financial transactions between the 

Peace Corps and other federal agencies. Public activities are those with nongovernmental 

customers, including Volunteers, contributors, employees, contractors, and vendors.
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Federal Financial Statements 

Statement Federal Objective

Balance Sheet Reflects the agencyʼs financial position as of the 

statement date. The assets are the amount of future 

economic benefits owned or managed by the agency. 

The liabilities are amounts owed by the agency. The 

net position is the difference between the assets and 

liabilities.

Statement of Net Cost Shows separately the components of the net cost of 

the agencyʼs operations for the period. Net cost is 

equal to the gross cost incurred by the agency less 

any exchange revenue earned from its activities. 

Statement of Changes 

in Net Position 

Explains how the net cost for the agencyʼs operations 

was funded, and reports other changes in equity that 

are not included in the Statement of Net Cost. It 

reflects the changes in both the proprietary and the 

budgetary activities through the respective 

components: Cumulative Results of Operations and 

Unexpended Appropriations. 

Statement of Budgetary 

Resources 

Provides information about how budgetary resources 

were made available as well as their status at the end 

of the period. It is the only financial statement 

exclusively derived from the agencyʼs budgetary 

general ledger in accordance with budgetary 

accounting rules. 

Statement of Financing Demonstrates the relationship between budgetary 

amounts reported on the Statement of Budgetary 

Resources to the proprietary amounts reported on the 

Statement of Net Cost. The focus of this presentation 

is to reconcile net obligations to the net cost of 

operations. 

c) Basis of Accounting

Accounting principles encompass both accrual and budgetary transactions. Under the 

accrual method, revenues are recognized when earned and expenses are recognized when 

a liability is incurred, without regard to receipt or payment of cash. Under the budgetary 

basis, however, fund availability is recorded based upon legal considerations and 

constraints. As a result, certain line items on the proprietary financial statements may 

not equal similar line items on the budgetary financial statements. 
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The agency receives financing sources through direct appropriations from the general 

fund of the Treasury to support its operations. This financing source--appropriations 

used--is recognized to the extent these funds have been consumed. 

d) Fund Accounting Structure 

The agency’s financial activities are accounted for by federal account symbol. They 

include accounts for appropriated funds and other fund groups described below for which 

the Peace Corps maintains financial records. 

General Funds--These funds consist of the receipts and expenditures by the government 

that are not earmarked by law for a specific purpose and used to fund agency operations 

and capital expenditures. 

Special or Trust Funds--These funds consist of receipts and expenditures by the 

government for carrying out specific purposes and programs in accordance with terms of 

the statute that designates the fund as a special or trust fund. The balances in the 

agency’s trust funds are nonentity assets and are not included in the financial statements. 

Deposit Funds--These funds consist of monies held temporarily by Peace Corps as an 

agent for others. These include allowance and allotment accounts for employees and 

volunteers. The balances in these funds are nonentity assets and are not included in the 

financial statements. 

General Fund Receipt Accounts--These funds consist of monies collected by Peace Corps 

that are returned to the U.S. Treasury and not available for Peace Corps use. 

e) Budget Authority 

Congress annually passes multiyear appropriations that provide the agency with authority 

to obligate funds over a two-year period for necessary expenses to carry out operations.

The annual budget authority funds are available five additional years to complete the 

liquidation of open obligations, advances, and receivables. After the five- year period, all 

open transactions for the respective fiscal year will be closed and funds returned to the 

U.S. Treasury. Any valid claims associated with these funds after closure must be 

processed against current year funds.

In addition, Congress enacts multi year appropriations that are available until expended. 

All appropriations are subject to OMB apportionment as well as Congressional 

restrictions.

The agency places internal restrictions to ensure the efficient and proper use of all funds. 
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f) Revenues and Other Financing Sources 

Peace Corps operations are financed through appropriations, proceeds from the sale of 

property, and interagency agreements. 

For financial statement purposes, appropriations are recorded as a financing source and 

reported on the Statement of Changes in Net Position at the time they are recognized as 

expenditures.

g) Fund Balance with the U.S. Treasury 

The fund balance with Treasury consists of appropriated funds that are available to pay 

current liabilities and finance authorized purchase commitments, and special funds that 

periodically are direct-financing reimbursements to the appropriated funds. 

The agency does not maintain cash in commercial bank accounts for the funds reported in 

the balance sheet. All cash receipts and disbursements are processed by the U.S. 

Treasury or the Department of State (DOS). 

The funds that make up the post cashiers’ imprest funds belong to the U.S. Treasury 

through DOS’s accountability. These funds are routinely used to pay for small value 

purchases of goods and services and are also used to make an occasional emergency 

payment. Per agreement with the DOS, Peace Corps is responsible to pay for any losses 

incurred by the cashiers that would normally fall on the account holder. All international 

payments made by DOS on behalf of the Peace Corps are charged to the Peace Corps and 

reduce the applicable Peace Corps appropriation unexpended balance in the U.S. 

Treasury records.

At any point in time the posts have USD and local currency checks in their possession 

which are awaiting delivery to the payees. These checks were recorded as disbursements 

on Peace Corps and Treasury records in the month the checks were issued. As of 

September 30, 2005, these checks totaled approximately $2.1 million in U. S. dollar 

equivalents.

Fund balance with Treasury is carried forward until such time as goods or services are 

received and payment is made, or until the funds are returned to the U.S. Treasury. 

h) Foreign Currency

Accounting records for the agency are maintained in U.S. dollars, while a significant 

amount of the overseas expenditures are in foreign currencies. For accounting purposes, 

overseas obligations and disbursements are recorded in U.S. dollars based on the rate of 

exchange as of the date of the transaction. Foreign currency payments are made by the 

U.S. disbursing officers located at the Department of State’s Financial Service Centers in 

Charleston, South Carolina; and Bangkok, Thailand.
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Foreign currency losses and gains resulting from changes in the rate of exchange are 

charged (or credited) to the same appropriation or account that financed the basic 

transaction.

i) Accounts Receivable

Accounts receivable include amounts due from other federal entities and from current and 

former employees and Volunteers. 

The agency recognizes an allowance for doubtful accounts consistent with the 

Department of Treasury’s requirement that agencies write-off any account that has been 

delinquent for more than two years. An exception to this write-off policy will be for 

accounts with approved payment plans in place and for which the debtor is meeting the 

terms of the plan. The allowance will be established in the financial records if the total 

amount exceeds $30,000; otherwise, the amount is considered immaterial. 

j) Advances and Prepayments 

Payments in advance of the receipt of goods and services are recorded as advances and 

recognized as expenses when the related goods and services are received. Advances are 

made principally to agency employees for official travel and prepayments to Volunteers 

for living allowances.

Pursuant to Section 5(b) of the Peace Corps Act, Peace Corps Volunteers are entitled to a 

living allowance in order that they may serve effectively and safely overseas. Living 

allowances are paid to Volunteers to provide support while in their country of 

assignment. Allowances include food, clothing, household items, rent, utilities, and local 

transportation that are based on local living standards and costs.

k) Property, Plant, and Equipment (PP&E)

For fiscal year 2005, the agency revised the policies and procedures for capitalized 

property and equipment and related depreciation to be in accordance with generally 

accepted accounting principles. 

A capital asset inventory of all Peace Corps PP&E assets was taken in fiscal year 2005. 

To establish existing PP&E where historical cost information necessary to comply with 

the recognition or measurement provisions had not been maintained, estimates were used 

based on either 1) cost of similar assets at the time of acquisition; or 2) a value based on 

the asset’s condition and fair market value. 

The agency capitalizes all property, plant, and equipment that have an acquisition cost of 

$10,000 or greater, have a useful life of two years or more, are not intended for sale in the 

ordinary course of business, and are intended to be used or available for use by the entity.

Acquisitions that do not meet these criteria are recorded as operating expenses. Assets 
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are capitalized at historical cost and depreciated using the straight-line method. No 

salvage values were estimated in calculating accumulated depreciation through FY 2005. 

This practice will be reviewed during FY 2006 and a policy determination made on 

whether salvage values should be estimated. 

The agency does not own any real property. Nonexpendable personal property is 

depreciated over 5 to 10 years. The agency operates land, buildings, and equipment that 

are provided by the General Services Administration. Rent for this property is expensed.

Software purchased or developed for internal use at a cost of $25,000 or greater is 

capitalized and amortized over its expected life (currently 3 to 9 years). Deferred 

maintenance amounts are immaterial with respect to the financial statements. 

l) Capital Leases 

Leases should be accounted for as a capital lease if they meet one of the following 

criteria: 1) the lease term is greater than 75 percent of the property's estimated economic 

life; 2) the lease contains an option to purchase the property for less than fair market 

value; 3) ownership of the property is transferred to the lessee at the end of the lease 

term; or 4) the present value of the lease payments exceeds 90 percent of the fair market 

value of the property. 

The agency does have a number of leases that meet at least one of these criteria, but 

deferred their capitalization since the agency’s current obligation practices for such leases 

are not consistent with the Treasury’s standard general ledger scenario for capital leases. 

m) Accounts Payable and Other Liabilities 

Liabilities represent the amount of monies or other resources that are likely to be paid as 

the result of a transaction or event that has already occurred. Liabilities classified as not 

covered by budgetary resources are liabilities for which appropriations have not been 

enacted.

n) Employee Benefits 

I. Federal Employees Compensation Act (FECA) Accrued Claims--The agency records 

the direct dollar costs of compensation and medical benefits paid on its behalf by the 

Department of Labor (DOL) for employees under the agency’s jurisdiction.

II. Future Workers Compensation Benefits--FECA provides income and medical costs 

protection to federal employees injured on the job or who have incurred a work-related 

occupational disease, and to beneficiaries of employees whose death is attributable to 

job-related injury or occupational disease. The U.S. Department of Labor (DOL) 

administers the FECA program. DOL initially pays valid claims and bills the agency on 

an annual basis.
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III. Accrued leave--A liability for annual leave is accrued as leave is earned and paid when 

leave is taken or employment terminates. Accrued annual leave is paid from future 

funding sources and is reflected as a liability not covered by budgetary resources. Sick 

and other leave is expensed as taken. 

IV. Employee Health Benefits and Life Insurance--The agency’s employees are eligible 

to participate in the contributory federal employee’s health benefit program (FEHBP) 

and the federal employees group life insurance program (FEGLIP). The agency 

matches the employee contributions to each program to pay for current benefits. 

V. Post--Retirement Health Benefits and Life Insurance--Agency employees who may 

be eligible to participate in the FEHBP and the FEGLIP could continue to do so during 

retirement. The Office of Personnel Management (OPM) has provided the agency with 

cost factors that estimate the true cost of providing the post-retirement benefit to current 

employees. The agency recognizes a current cost for these and other retirement 

benefits (ORBs) at the time of employment with the Agency. The ORB expense is 

financed by OPM and offset by the agency through the recognition of an imputed 

financing source on the Statement of Financing. 

VI. Employee Retirement Benefits--Peace Corps direct hire employees participate in one 

of three retirement systems: Civil Service Retirement System (CSRS), Federal 

Employees’ Retirement System (FERS), or the Foreign Service Retirement and 

Disability System (FSRDS). The following table provides data for each of these plans: 

Employee Deductions/Agency Contributions 

Plan

% of PC 

Participants Plan TSP FICA Medicare

CSRS 6 7% / 7% N/A N/A 1.45% / 1.45% 

FERS 92 8% / 10.7% 

See

Note 6.2% / 6.2% 1.45% / 1.45% 

FSRDS 2 7.25% / 7.25% N/A N/A 1.45% / 1.45% 

Note: The agency contributes 1% of the employees' basic pay; it will also match 

employees' contributions up to 4% of their basic pay. 

Foreign service national (FSN) employees at overseas posts who were hired prior to 

January 1, 1984, are covered under CSRS. FSNs hired after that date are covered under 

a variety of local government plans in compliance with the host country’s local laws 

and regulations.

Peace Corps recognizes its share of the cost of providing future pension benefits to 

eligible employees throughout their period of employment. The pension expense not 

covered by budgetary resources is calculated using actuarial factors provided by OPM 

and is considered imputed cost to the agency. 
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VII. Valuation of Foreign National Personal Service Contractor Severance and 

Retirement Liability--The Peace Corps is liable for separation or retirement payments 

to eligible foreign national personal service contractors (PSCs) in countries that require 

payments under local labor laws. Until systems are in place to track this liability in a 

timely manner, the estimate of the current and future costs of the severance and 

retirement liability is determined annually. 

For 2004, this estimated liability was determined for the first time. Details of PSCs by 

post were accumulated from multiple sources and an estimate of $13.9 million was 

projected based on an average of two months salary for every year of service.

For 2005, the calculation of the liability was refined to identify it by individual and 

apply the applicable local labor law requirements. The FY 2005 estimate was $6.8 

million. 

In accordance with generally accepted accounting principles, the Peace Corps 

should consider restating the 2004 estimated liability in the balance sheet and related 

financial reports. Due to the extensive time and effort that would be required to 

reconstruct such a level of detail for the 2004 liability, the Peace Corps will not restate 

this liability and rely on the understanding that the FY 2004 estimated liability in the 

balance sheet and related financial reports was a reasonable estimate at the time it was 

made within the data and assumptions that were used. 

o) Commitments and Contingencies 

The agency is involved in various administrative proceedings, legal actions, and claims 

arising in the ordinary course of business. Contingencies are recognized as a liability 

when a future outflow or other sacrifice of resources is probable and measurable. 

p) Use of Estimates 

The preparation of financial statements required management to make some estimates 

and assumptions that affect the reported amount of assets and liabilities, as well as the 

disclosure of contingent liabilities at the date of the financial statements, and the amount 

of revenues and costs reported during the period. Actual results could differ from those 

estimates. 

q) Interest on Late Payments 

The agency on occasion incurs interest penalties on late payments. Such interest 

penalties are paid to the respective vendor in accordance with the guidelines mandated by 

the Prompt Payment Act, P.L. 97-177, as amended. 
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r) Intragovernmental Net Costs

The Statement of Net Costs is consolidated for the agency using a budget functional 

classification (BFC) code. BFC codes are used to classify budget resources presented in 

the budget of the United States government per OMB. The agency is categorized under 

BFC code number 150--International Affairs. Gross cost and earned revenues from other 

intragovernmental agencies (reimbursable agreements) fall under this code. 

s) Beginning Balances as of October 1, 2003 

The agency implemented a new financial management system on October 1, 2003, 

replacing a legacy system that was not U.S. Standard General Ledger (USSGL) 

compliant. 

Opening balances brought forward to the new system reflected the final balances for each 

Treasury Account Fund Symbol (TAFS) as of September 30, 2003. The obligations, 

receivables, and payables detail from the legacy system were transferred. Data were 

modified based on proper documentation. All non standard accounts were eliminated and 

balances moved to the appropriate USSGL accounts. Applicable accounts and budgetary 

authorities were reconciled and balanced to the U.S. Treasury fund balances. Due to this 

approach, there may be items that could create a future expenditure for which the 

obligation/liability had not been captured in the beginning balances. 

t) Adjustments to Maintain Inherent Account Relationship Integrity 

At the fiscal years ending 2004 and 2005, the trial balance was reviewed and it was 

determined that there existed out of balance conditions. These conditions were attributed 

to various factors such as timing differences between the posting of proprietary account 

entries and budgetary account entries, incorrect use of transaction codes by users or 

systemic issues that were identified but still unresolved.

In order to correct the relationships between the proprietary and budgetary accounts, an 

analysis was performed at the high level. Cash balances on the books were aligned to 

agree with budgetary account balances. Additionally, cash balances were adjusted to 

align with Treasury fund balance to facilitate the Agency to pass edit checks and submit 

FACTS II reports to Treasury. 
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Note 2 Non-entity Assets 

Balance Sheet 

Nonentity assets are composed of trust and deposit funds. These funds are not available 

for Peace Corps use and not part of Peace Corps resources. The Peace Corps has a 

fiduciary responsibility to monitor collections, status and distribution. During fiscal year 

2005, the agency determined that the special funds (reported last year as non entity 

assets) are entity assets. Below, as information, are the Treasury fund balances of the 

nonentity, fiduciary assets. 

Intragovernmental Fund Balance with Treasury 

September 30, 

2005 

In Thousands

September 30, 

2004 

In Thousands

Trust Funds 

Gifts and Contributions (Cash) $ 665 $ 849 

Advances from Foreign Governments 55 52 

FSN Separation Liability Trust Fund 9,091 6,561 

Deposit Funds 

Volunteer Readjustment Allowance 15,933 16,455 

Volunteer Payroll Allotment Account 

(Payroll Savings Bond Account) 

(24) (29) 

Total Nonentity Assets $ 25,720 $ 23,888 

Total Entity Assets per Balance Sheet $149,857 $ 102,476 

Total Assets $175,577 $ 126,364 

Trust Fund Accounts--Consists of gifts and contributions, advances from foreign 

governments, and FSN separation liability trust fund. Gifts and contributions represent 

funds from public, nongovernmental sources. Advances from foreign governments are 

U.S. dollar contributions supported by an agreement with the host country. The FSN 

separation liability trust fund represents the estimated accrued liability for separation pay 

(based on local labor law) of FSN employees. 

Deposit Fund Accounts--The Volunteer readjustment allowance is an allowance earned 

by Volunteers for each month of satisfactory service and payable upon their return to the 

United States. The Volunteer payroll allotment account reflects the value of held U. S. 

government bonds purchased by the Volunteers through allotments from the 

readjustment allowance. The bonds allow the Volunteers to earn interest on their 

earnings while in service overseas. 
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Note 3 Fund Balance with Treasury 

Balance Sheet 

Fund Balances September 30, 

2005 

In Thousands

September 30, 

2004 

In Thousands

Appropriated Funds $ 100,715 $ 95,488 

Total Nonentity Assets (Note 2) 25,720 23,888 

Other Fund Types (Special Fund Accounts) 1,227 1,399 

Total $ 127,662 $ 120,775 

Special Fund Accounts--The proceeds of sales funds represent cash received from the 

sale of assets, primarily vehicles, and available to be reinvested in a like-kind 

replacement purchase (e.g., proceeds from vehicle sales used to purchase replacement 

vehicles).

As discussed in Note 2, the agency has revised its treatment of these special funds and 

restated the 2004 values to reflect this revision.

Status of Fund Balance with Treasury September 30, 

2005 

In Thousands

September 30, 

2004 

In Thousands

(1) Unobligated Balance 

(a) Available $ 14,252 $ 9,673 

(b) Unavailable 6,104 13,408 

(2) Obligated Balance Not Yet Disbursed 80,359 72,407 

(3) Nonbudgetary Fund Balance with Treasury 

Total Nonentity Assets 25,720 23,888 

Other Fund Types (Special Fund Accounts) 1,227 1,399 

Fund Balance with Treasury $ 127,622 $ 120,775 

The fund balance with Treasury is equal to the unobligated balance of funds plus the 

obligated balance not yet disbursed. 

Available Unobligated Balance--Composed of apportionments available for allotment 

plus allotments available for obligation or commitment. 

Unavailable Unobligated Balance--Composed of unapportioned authority plus 

unobligated appropriation authority from prior years that is no longer available for new 

obligations. This latter authority is only available for adjustments to existing obligations. 
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Note 4 Cash and Other Monetary Assets 

Balance Sheet 

September 30, 

2005 

In Thousands

September 30, 

2004 

In Thousands

Total Cash and Other Monetary Assets $139 $134 

The cash balances represent imprest funds at headquarters and at the East Timor post, 

both held in U.S. currency.

Note 5 Net Accounts Receivable 

Balance Sheet 

September 30, 2005 

In Thousands

September 30, 2004 

In Thousands

Accounts Receivable--Intragovernmental $ 1,712 $ 1,127 

Accounts Receivable from the Public 39 31 

Gross Accounts Receivable $ 1,751 $ 1,158 

Intragovernmental receivables are due from other federal agencies for services provided 

per reimbursable agreements. 

Accounts receivable from the public are due from nonfederal entities, consisting 

primarily of receivables from employees. 
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Note 6 General Property, Plant, and Equipment (PP&E) 

Balance Sheet 

Components of Fixed Assets as 

of September 30, 2005: 

In Thousands 

Useful

Life in 

Years

Cost Accumulated 

Depreciation

Net

Book

Value

General Property, Plant, and 

Equipment 

5 -10 $ 2,714 $ 1,320 $ 1,394 

Vehicles 5 17,284 9,784 7,500 

IT Hardware 3-7 4,773 1,824 2,949 

Internal-Use Software 5 - 9 37,464 7,610 29,854 

Total $ 62,235 $ 20,538 $ 41,697 

For fiscal year ending September 30, 2005, Peace Corps fixed assets include internally 

developed software and those assets that are reflected as active in the end of year 

personal capital property management system (PCPMS) databases. These assets are 

located at headquarters in Washington, D.C., the eleven regional offices, and the overseas 

posts.

Values for all assets other than internally developed software were obtained from data 

extracted from the PCPMS databases. Values for internally developed software were 

developed from the most reliable available data for each system. 

Capital leases were not capitalized this fiscal year because the agency’s obligation 

practices for such leases were not consistent with the Treasury standard general ledger 

scenario.

PP&E values were not captured for fiscal year ending September 30, 2004, reporting 

purposes. Accordingly, no comparison can be made. Assets acquired in fiscal year 2004 

(and prior) were expensed. Accordingly, a prior period adjustment was posted for the 

capitalized net book value (October 1, 2004) of those assets currently on hand that were 

acquired prior to this fiscal year.
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Note 7 Prepaid Volunteer Living Allowances 

Balance Sheet 

September 30, 2005 

In Thousands

September 30, 2004 

In Thousands

Prepaid Volunteer Living Allowances $ 3,668 $ 3,665 

Prepaid Volunteer Living Allowances--Payments of Volunteer living allowances are 

made prior to the entitlement month so the posts can ensure timely payments of the 

allowances.

Note 8 Other Assets 

Balance Sheet 

September 30, 

2005 

In Thousands

September 30, 

2004 

In Thousands

Relocation Advances to Employees $ 66 $ 66 

Prepayments to FN-PSCs 5 101 

Travel Advances to Employees 589 465 

Total Other Assets $ 660 $ 632

Relocation Advances to Employees--Direct-hire employees are provided a relocation 

advance when appropriate. 

Prepayments to Foreign National Personal Service Contractors--Payments of the 

foreign national personal service contractors’ (FN-PSCs) biweekly payrolls are made 

prior to the end of the pay period so that the direct deposits or checks are received by the 

last day of the pay period. For September 2005, the accounting period and the pay 

entitlement period ended on the same day (Friday, the 30th); therefore, there is no prepaid 

value on this year’s statements. For September 2004, the accounting period ended on 

Thursday, the 30th, whereas payments were made through Friday, October 1st. 

Travel Advances to Employees--Travel advances are provided to employees when 

appropriate. Advances remain in the financial records until they are offset against travel 

entitlements or collected. 
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Note 9 Liabilities Not Covered by Budgetary Resources 

Future Funding Requirements

September 30, 

2005 

In Thousands

September 30, 

2004 

In Thousands

Intragovernmental Liabilities 

Unfunded FECA Liability $ 24,606 $ 24,553 

Public Liabilities 

Unfunded Annual Leave 6,534 3,216

Other Unfunded Employment Related 

Liability

6,796 13,973

Federal Employee and Veterans 

Benefits 

126,651 125,709 

Total liabilities not covered 

by budgetary resources

$ 164,587 $ 167,451 

Unfunded FECA Liability--A liability for the direct dollar costs of compensation and 

medical benefits paid on the agency’s behalf by DOL. Since the agency is dependent on 

annual appropriation, it will include the amount billed for the direct costs in its budget 

request two years later. Accordingly, the September 30, 2005, liability consists of (1) 

costs for the DOL 2004 billing period that were reported to the Peace Corps in August 

2004 and were included in the agency’s budget request for fiscal year 2006; (2) costs for 

the DOL 2005 billing period which were reported to the Peace Corps in August 2005 and 

will be included in the agency’s budget request for fiscal year 2007; and (3) the estimated 

liability for the period of July-September 2005.

Unfunded Annual Leave (U.S. Employees)--A liability for annual leave is accrued as 

leave is earned and paid when leave is taken or when the individual terminates. The 

balance represents the estimated value of annual leave for U.S. hired employees earned as 

of September 30, 2004. Payments are charged to the appropriation current at the time of 

payment. 

Unfunded Annual Leave (FSN/FN PSC)--The valuation of the accrued annual leave for 

foreign service national employees and the foreign national PSCs has been estimated for 

this financial statement. There are approximately 200 foreign service nationals and a 

range of 1,500 to 2,000 foreign national PSCs working for Peace Corps at fiscal year end.

Annual leave earned is based on local labor law requirements. Annual leave is paid out 

of current appropriations when taken. 

Other Unfunded Employment Related Liability--A liability for the FN-PSC estimated 

severance. Lump-sum payments are made to eligible international long-term personal 

service contractors based on local labor law requirements for separation. These payments 

are made when the individual terminates and paid for out of current appropriations.
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Federal Employee and Veterans Benefits--Liability for the actuarial value of future 

payments for FECA as estimated by the Department of Labor for the agency. 

Note 10 Other Liabilities 

Balance Sheet 

September 30, 

2005 

In Thousands

September 30, 

2004 

In Thousands

Intragovernmental Liabilities 

Special Funds Account $ 1,227 $ 1,399 

Advances from Others 2 29 

Liability for Deposit Funds, Clearing 

Accounts, and Undeposited Collections

- 17 

Total Other Intragovernmental Liabilities $ 1,229 $ 1,445 

Contingent Liability $ 125 $ - 

Total Other Liabilities $ 1,354 $ 1,445 

Special Funds Accounts--The proceeds of sales funds represent cash received from the 

sale of assets, primarily vehicles, and available to be reinvested in a like-kind 

replacement purchase (e.g., proceeds from vehicle sales used to purchase replacement 

vehicles).

As discussed in Note 2, the agency has revised its treatment of these special funds and 

restated the 2004 values to reflect this revision.

Advances from Others--The balance of amounts advanced by other federal entities for 

goods and services to be furnished (e.g., money advance for small project assistance 

grants).

Liability for Deposit Funds, Clearing Accounts, and Undeposited Collections--

Amounts offsetting undeposited collections and collections deposited in deposit funds 

and clearing accounts, including suspense accounts, awaiting deposition or 

reclassification.

Contingent Liability – See Note 12. 
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Note 11 Leases

Disclosure 

Operating Leases September 30, 

2005 

In Thousands

Future Payments Due: 

2006 $ 13,683 

2007 11,737 

2008 7,017 

2009 1,688 

2010 1,095 

Thereafter 2,219 

Total Future Lease Payments $ 37,439 

OPERATING LEASES: 

The agency rents 246,306 square feet of space in both commercial and governmentowned properties for use as offices, storage, and parking within the United States. All 

Peace Corps domestic leases, whether commercial or government-owned properties, are 

managed by the General Services Administration (GSA). 

Overseas leases originate at the post and are primarily for offices, training centers, 

medical centers, and residences. During fiscal year 2005, the overseas leases were 

reviewed, summarized, and projected for future lease payments. The overseas leases 

were not included in the September 30, 2004, future lease payments. 

The agency has identified less than 20 capital leases with future costs of less than $1.3 

million but deferred their capitalization until the applicable policy and procedures are 

developed.
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Note 12 Commitments and Contingencies 

Disclosure 

In the opinion of the management and legal counsel, the likelihood that the agency is 

liable for contingent liabilities related to administrative proceedings, legal actions, or 

claims is probable and measurable as of this statement date in the amount of $125,000. 

Disclosure is required if there is a reasonable possibility that a loss may incur. The 

likelihood of a reasonable possibility of a loss related to administrative proceedings, legal 

actions, or claims is estimated to be $1.2 million as of this date. 

Obligations related to canceled appropriations for which the agency has contractual 

commitments for payout are estimated to be $262,000 as of September 30, 2005. 

Note 13 Imputed Financing 

Disclosure 

September 30, 

2005 

In Thousands

September 30, 

2004 

In Thousands

Federal Employees Health Benefit Program 

(FEHBP)

$ 3,386 $ 3,008 

Federal Employees Group Life Insurance 

Program (FEGLIP) 

12 11 

Civil Service Retirement System (CSRS) 792 875 

Federal Employees Retirement System (FERS) 299 263

Foreign Service Retirement and Disability 

System (FSRDS) 

208 291 

Total Imputed Costs $ 4,697 $ 4,448 

Imputed financing recognizes actual costs of future benefits which include the FEHBP, 

FEGLIP, and pensions benefits that are paid by other federal entities. The agency is not 

required to reimburse other entities for these costs. 
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Note 14 Exchange Revenues 

Statement of Net Cost 

September 30, 

2005 

In Thousands

September 30, 

2004 

In Thousands

Intragovernmental Earned Revenues $ 3,325 $ 4,279 

Earned Revenues from the Public -0- -0- 

Total Exchange revenues $ 3,325 $ 4,279 

Exchange revenues represent revenue from services provided. This includes 

reimbursable agreements from other government agencies such as USAID-sponsored 

HIV/AIDS education, prevention, and mitigation activities and umbrella programs 

covering environment, health, youth, microenterprise, SPA technical assistance, and 

economic growth in fiscal year 2004. 

There are no goods or services provided to the public that earn revenues for the agency. 

Note 15 Restatement

Balance Sheet Restatement - Assets Original 

September 30, 

2004 

In Thousands

Restated 

September 30, 

2004 

In Thousands

Appropriated Funds $ 95,488 $ 95,488 

Total Nonentity Assets 25,287 23,888 

Other Fund Types (Special Fund Accounts) - 1,399 

Fund Balance with Treasury Total $ 120,775 $ 120,775 

Please reference note 3. 

Balance Sheet Restatement - Liabilities Original 

September 30, 

2004 

In Thousands

Restated 

September 30, 

2004 

In Thousands

Intragovernment - Other Liabilities $ - $ 1,399 

Other Liabilities with the Public – Non-Entity 

Funds

25,287 23,888

Total $ 25,287 $ 25,287 

Please reference note 10. 
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In fiscal year 2004, $1.4 million in Special Funds were included in the $25.3 

million reflected as Non-Entity Funds and in Other Liabilities – Non-Entity in the 

balance sheet as of September 30, 2004.

As discussed in Note 2, the agency has revised its treatment of these special funds 

and restated the 2004 values to reflect this change from non-entity to entity funds. 

Supplementary information 

Disclosure on Contributions

1. Media Contributions Received--The agency received $13.8 million in print, 

radio, and television media contributions through public service 

announcements in fiscal year 2005. 

2. Host Country Contributions--The agency received cash and in-kind 

contributions from host countries. 

In-kind contributions estimated at $3.84 million in fair market value were 

received in fiscal year 2005 at posts for services, supplies, equipment, and 

facilities. 

The estimated value of the cash contributions received in fiscal years 2005 

and 2004 ranged from $800 to $900 thousand in U.S. dollar equivalents with a 

September 30, 2005 Treasury fund balance of $696 thousand in U. S. dollar 

equivalents.

These cash contributions are received in local currency and maintained at post 

to support the Volunteers. As the agency changed its financial management 

system in 2004, so did the Department of State (DOS). Reconciliation of 

these cash contributions became possible only after the DOS captured the 

agency’s local currency amount and the identifier for the transactions was 

agreed upon in 2005. Now that the identifier issues are resolved, the agency 

anticipates the cash activities will be recognized as entity activities in future 

financial statements. 
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Disclosure on Trading Partners

Peace Corps 

Intragovernmental Assets by Trading Partner 

As of September 30, 2005 

(In Thousands) 

Trading Partner Fund Balance with Treasury Accounts Receivable 

U.S. Treasury Department $ 127,662 

Agency for Internatinal 

Development 

$ 1,159

Department of Homeland 

Security

$ 547

Other $ 6

Total $ 127,662 $ 1,712 

Peace Corps 

Intragovernmental Liabilities by Trading Partner 

As of September 30, 2005 

(In Thousands) 

Trading Partner Accounts Payable Other Unfunded FECA

Department of State $ 2,035 

U.S. Treasury Department $ 1,229 

Department of Labor $ 24,606 

Total $ 2,035 $ 1,229 $ 24,606 

Intragovernmental Earned Revenues: Peace Corps’ total intragovernmental earned 

revenues from trade transactions were less than the $500 million dollar materiality 

threshold for reporting as determined by OMB. 

Intragovernmental Nonexchange Revenue: Peace Corps did not realize 

intragovernmental nonexchange revenue transferred in nor incur intragovernmental 

nonexchange revenue transferred out. 
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The Peace corPs | performance and accountability report | fiscal year 2005

financial rePorT

Offi ce of Inspector General

To: Gaddi Vasquez, Director

From: Allan R. Gall, Acting Inspector General

Date: November 15, 2005

Subject: FY 2005 Audit of Peace Corps’ Financial Statements 

This letter transmits Urbach Kahn and Werlin LLP’s (UKW) Report of Independent Auditors on the results 

of their engagement to perform an audit of Peace Corps’ Fiscal Year 2005 fi nancial statements. UKW’s Report 

includes the fi rm’s Report on the Financial Statements, Report on Internal Control, and Report on Compliance 

with Laws and Regulations. 

Objective of a Financial Statement Audit

The objective of a fi nancial statement audit is to determine whether the fi nancial statements are free of material 

misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures 

in the fi nancial statements. An audit also includes assessing the accounting principles used and signifi cant estimates made by management as well as evaluating the overall fi nancial statement presentation. UKW’s engagement was conducted in accordance with generally accepted auditing standards, Government Auditing Standards 

issued by the Comptroller General of the United States, and Offi ce of Management and Budget (OMB) Bulletin 

01-02, Audit Requirements for Federal Financial Statements. An audit includes obtaining an understanding of 

the internal control over fi nancial reporting and testing and evaluating the design and operating effectiveness 

of the internal control. Because of inherent limitations in any internal control, there is a risk that errors or fraud 

may occur and not be detected. 

Audit of Financial Statements, Effectiveness of Internal Control, and Compliance with 

Laws and Regulations

The Accountability of Tax Dollars Act of 2002 (P.L. 107-289) enacted on November 7, 2002, requires Peace 

Corps’ Inspector General (IG) or an independent external auditor, as determined by the IG, to audit Peace Corps’ 

fi nancial statements in accordance with applicable standards. Under a contract monitored by the Offi ce of the 

Inspector General (OIG), UKW, an independent certifi ed public accounting fi rm, was engaged to audit Peace 

Corps’ FY 2005 fi nancial statements. Because of matters identifi ed in their report, UKW issued a disclaimer of 

opinion on Peace Corps’ FY 2005 fi nancial statements. 

Although the work conducted by UKW identifi ed fi ve reportable conditions that were considered material weaknesses, Peace Corps had made progress in its overall fi nancial management during FY 2005. This progress was 
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achieved despite the turnover of the CFO and Deputy CFO positions during the year and was facilitated in particular by management’s quick action in appointing a new CFO. The “Letter from the Chief Financial Officer” 

outlines a number of financial management initiatives that were initiated or completed during the year. We 

found agency management cognizant of and in the process of planning the necessary actions for the agency to 

obtain an unqualified opinion in the future.

OIG Evaluation of UKW Audit Performance

To fulfill our responsibilities under the CFO Act and related legislation for ensuring the quality of the audit work 

performed, we monitored UKW’s engagement to audit Peace Corps’ FY 2005 financial statements by:

• Reviewing UKW’s approach and planning of the engagement;

• Evaluating the qualifications and independence of its auditors;

• Monitoring the progress of the engagement throughout the audit process;

• Reviewing UKW’s reports to ensure compliance with Government Auditing Standards and OMB 

Bulletin 01-02.

• Coordinating the issuance of the reports; and

• Performing other procedures that we deemed necessary.

UKW is responsible for the attached auditor’s report, dated November 8, 2005, and the opinions and conclusions 

expressed therein. The OIG is responsible for technical and administrative oversight regarding UKW’s performance under the terms of the contract. 

cc: Jody Olsen, Deputy Director

Jay Katzen, Acting Chief Of Staff/Operations

David Liner, Deputy Chief of Staff/Operations

George Schutter, Chief Financial Officer
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INDEPENDENT AUDITORʼS REPORT 

ON THE FINANCIAL STATEMENTS 

Director 

Peace Corps 

Office of the Inspector General 

Peace Corps 

We were engaged to audit the accompanying Consolidated Balance Sheets of the 

Peace Corps, an independent executive branch agency of the United States federal 

government, as of September 30, 2005 and 2004, and the related Consolidated 

Statements of Net Cost, Changes in Net Position, and Financing, and the Combined 

Statements of Budgetary Resources for the years then ended. These financial 

statements are the responsibility of the management of Peace Corps. 

Peace Corps has not established an effective financial management structure and 

monitoring process within the Office of the Chief Financial Officer in order to properly 

support the recorded account balances. Peace Corpsʼ internal controls were not adequate 

to ensure that its account balances reported on the financial statements were properly 

compiled and reviewed, classified and disclosed, and that transactions were accurately 

and completely recorded. Further, Peace Corps has not maintained adequate accounting 

records and sufficient supporting documentation for material balances presented in the 

accompanying financial statements. We were unable to sufficiently extend our auditing 

procedures to determine the extent to which the financial statements may have been 

affected by these conditions. 

Since Peace Corps did not establish an effective financial management structure, have 

adequate internal controls, or maintain adequate accounting records and sufficient 

supporting documentation, and because we were unable to apply other auditing 

procedures to satisfy ourselves as to the extent to which the financial statements were 

affected by these matters, as explained in the preceding paragraph, the scope of our work 

was not sufficient to enable us to express, and we do not express, an opinion on the 

financial statements referred to in the first paragraph. 

The information in the Required Supplementary Information, including Managementʼs 

Discussion and Analysis, is not a required part of the financial statements, but is 

supplementary information required by the Federal Accounting Standards Advisory Board 

and Office of Management and Budget Circular No. A-136, Financial Reporting 

Requirements. Because management did not prepare certain Required Supplementary 

Information and because of the reasons explained in the preceding two paragraphs, we 

were unable to apply certain limited procedures prescribed by professional standards to 

this information. 
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INDEPENDENT AUDITORʼS REPORT 

ON THE FINANCIAL STATEMENTS, CONTINUED 

In accordance with Government Auditing Standards, we have also issued reports dated 

November 8, 2005 on our consideration of Peace Corpsʼ internal control over financial 

reporting, and on our tests of its compliance with certain provisions of applicable laws, 

regulations, contracts and grants. Those reports are an integral part of an engagement 

to perform an audit in accordance with Government Auditing Standards and, in 

considering the results of the engagement, those reports should be read in conjunction 

with this report. 

Washington, DC 

November 8, 2005
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INDEPENDENT AUDITORʼS REPORT 

ON INTERNAL CONTROL 

Director 

Peace Corps 

Office of the Inspector General 

Peace Corps 

We were engaged to audit the financial statements of the Peace Corps, an independent 

executive branch agency of the United States federal government, as of and for the year 

ended September 30, 2005, and have issued our report thereon dated November 8, 2005, 

in which we disclaimed an opinion on those financial statements for the reasons noted in 

that report. 

In planning and performing our engagement, we considered Peace Corpsʼ internal 

control over financial reporting by obtaining an understanding of Peace Corpsʼ internal 

control, determined whether internal controls had been placed in operation, assessed 

control risk, and performed tests of controls in order to determine our engagement 

procedures. We limited our internal control testing to those controls necessary to 

achieve the objectives described in Office of Management and Budget (OMB) Bulletin 

No. 01-02, Audit Requirements for Federal Financial Statements, as amended, and 

Government Auditing Standards. We did not test all internal controls relevant to 

operating objectives as broadly defined by the Federal Managersʼ Financial Integrity Act 

of 1982, such as those controls relevant to ensuring efficient operations. The objective of 

our engagement was not to provide assurance on internal control. Consequently, we do 

not provide an opinion on internal control. 

Our consideration of the internal control over financial reporting would not necessarily 

disclose all matters in the internal control over financial reporting that might be 

reportable conditions. Under standards issued by the American Institute of Certified 

Public Accountants, reportable conditions are matters coming to our attention relating to 

significant deficiencies in the design or operation of the internal control that, in our 

judgment, could adversely affect Peace Corpsʼ ability to record, process, summarize, 

and report financial data consistent with the assertions by management in the financial 

statements. Material weaknesses are reportable conditions in which the design or 

operation of one or more of the internal control components does not reduce to a 

relatively low level the risk that misstatements in amounts that would be material in 

relation to the financial statements being audited may occur and not be detected within a 

timely period by employees in the normal course of performing their assigned functions. 

Because of inherent limitations in internal controls, misstatements, losses, or 

noncompliance may nevertheless occur and not be detected. 

However, we noted certain matters involving the internal control and its operation that 

we considered to be reportable conditions, all of which are considered material 

weaknesses.
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INDEPENDENT AUDITORʼS REPORT 

ON INTERNAL CONTROL, CONTINUED 

These conditions, detailed on the following pages, are summarized as follows: 

1. Peace Corps did not have adequate controls over its financial management 

structure and monitoring processes. 

2. Peace Corps did not have adequate controls over its accounting business 

processes. 

3. Peace Corps was not able to substantiate material account balances. 

4. Peace Corps did not have adequate controls over its reconciliation and 

financial reporting processes. 

5. Peace Corps did not have adequate controls over its information systems 

control environment.

In addition, with respect to internal control related to performance measures reported in 

the Managementʼs Discussion and Analysis, we obtained an understanding of the design 

of significant internal controls relating to the existence and completeness assertions, as 

required by OMB Bulletin No. 01-02. Our procedures were not designed to provide 

assurance on internal control over reported performance measures, and, accordingly, we 

do not provide an opinion on such controls. 

We also noted other less significant matters involving the internal control and its operation, 

which we have reported to the management of Peace Corps in a separate letter, dated 

November 8, 2005. 

This report is intended solely for the information and use of the management of Peace 

Corps, the Peace Corpsʼ Office of Inspector General, OMB, and Congress, and is not 

intended to be and should not be used by anyone other than these specified parties. 

Washington, DC 

November 8, 2005 
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INDEPENDENT AUDITORʼS REPORT 

ON INTERNAL CONTROL, CONTINUED 

REPORTABLE CONDITION 1 (Material Weakness) 

PEACE CORPS DID NOT HAVE ADEQUATE CONTROLS OVER ITS FINANCIAL 

MANAGEMENT STRUCTURE AND MONITORING PROCESSES

During fiscal year (FY) 2004, Peace Corps began to take measures to improve the 

financial management structure and monitoring processes, including increased 

involvement of senior management in the financial reporting process. 

During FY 2005, Peace Corpsʼ control environment and financial management structure 

remained insufficient to ensure that financial information was accurate and complete, and 

that financial reporting was timely and reliable. Management had not established an 

effective oversight and monitoring process to ensure the continued improvements in 

Peace Corpsʼ financial management process, in part because Peace Corps had not 

completed the realignment of its personnelʼs roles and responsibilities with the related 

financial management processes. Specific issues identified during the year included: 

x Ownership roles for specific financial statement lines, general ledger accounts and 

subsidiary ledgers were not defined. 

x Policies, procedures and monitoring roles were not clearly defined and delineated to 

ensure balances presented in the financial statements could be traced to the general 

ledger and subsidiary ledger. 

x Staff responsible for providing supporting details for financial statement balances 

were not always aware which general ledger accounts made up the line items in the 

financial statements. 

x Existing processes and procedures were not consistently followed to ensure support 

for account balances was adequately reviewed for accuracy, completeness and 

compliance with accounting policies. Furthermore, the deficiencies in the account 

balances and in the adequacy of documentation were not always researched and 

resolved. 

During the year, both the Chief Financial Officer (CFO) and Deputy CFO left the agency. 

These vacancies were filled in FY 2005. In September 2005, the Director, in conjunction 

with the new CFO, announced a reorganization of the Office of the Chief Financial Officer 

(OCFO) in order to address the concerns raised in prior engagement findings. The 

reorganization at the end of the fourth quarter was not in place long enough to have a 

measurable impact on Peace Corps financial management in FY 2005, and will need 

further refinement to achieve effective monitoring. 

Government Accountability Officeʼs (GAO) Standards for Internal Control in the Federal 

Government states, 

Management’s philosophy and operating style also affect the environment. 

This factor determines the degree of risk the agency is willing to take and 

management’s philosophy towards performance-based management.
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INDEPENDENT AUDITORʼS REPORT 

ON INTERNAL CONTROL, CONTINUED 

REPORTABLE CONDITION 1 (Material Weakness), CONTINUED 

Further, the attitude and philosophy of management toward information 

systems, accounting, personnel functions, monitoring, and audits and 

evaluations can have a profound effect on internal control... 

...Information should be recorded and communicated to management and 

others within the entity who need it and in a form and within a time frame 

that enables them to carry out their internal control and other 

responsibilities. 

For an entity to run and control its operations, it must have relevant, 

reliable, and timely communications relating to internal as well as external 

events. Information is needed throughout the agency to achieve all of its 

objectives. 

Recommendations

We recommend the Director of Peace Corps: 

1. Establish goals and timeframes for the completion of the reorganization of the 

OCFO. 

2. Define and document the official roles, responsibilities, policies and procedures 

for each financial management process performed by the OCFO. 

3. Assign the roles and responsibilities to staff for the monthly reconciliation, review, 

management monitoring and follow-up, including: 

x Monitoring on a monthly basis whether the subsidiary ledgers have been 

reconciled to the trial balance for all accounts and that differences identified 

have been researched and resolved during month-end close. These 

responsibilities should also identify who ensures reconciliations have been 

reviewed and signed off by CFO supervisors. 

x Management review of the support for adequacy and completeness for 

deficiencies in the documentation that support the balances that make up 

the financial statements and ensure the deficiencies are always researched 

and resolved.

x Monitoring processes that will ensure the financial statement line items are 

supportable and general ledger accounts can be reconciled to the 

subsidiary ledgers and supporting details.

4. Develop metrics for monitoring and reporting progress in reducing financial 

management deficiencies. 
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INDEPENDENT AUDITORʼS REPORT 

ON INTERNAL CONTROL, CONTINUED 

REPORTABLE CONDITION 2 (Material Weakness) 

PEACE CORPS DID NOT HAVE ADEQUATE CONTROLS OVER ITS ACCOUNTING 

BUSINESS PROCESSES 

Business Processes Over Fund Balance with Treasury Were Not Sufficient 

Peace Corps did not have a formal structure for organizing the Fund Balance with 

Treasury (FBWT) reconciliation and an overall reconciliation of FBWT was not being 

performed. While critical portions of the FBWT process were being performed by several 

people in different departments, these processes were not linked, compared, and 

monitored.

Peace Corps was unable to reconcile the monthly cash activity from its general ledger to 

Treasuryʼs FMS 6653, Undisbursed Appropriation Account Ledger, an independent 

confirmation from Treasury that reflects year-to-date and current month cash activity in 

appropriation, trust, revolving, clearing and deposit fund accounts.. Peace Corps 

manually adjusted its general ledger balance by approximately $2.9 million (net) to agree 

with Treasuryʼs balance at September 30, 2005. This adjustment included more than 

$6.7 million in debit and credit adjustments. 

Peace Corps is currently researching and correcting the differences identified on the 

Department of Treasury FMS 6652, Statement of Differences, for both older and more 

recent differences. However, the differences indicate that the financial balances may be 

misstated. Peace Corps indicated that their new financial system, Odyssey, cannot 

generate a detailed report listing all FBWT transactions that has sufficient detail 

regarding the disbursements and collections to be used for reconciling. Additionally, 

prior to January 2005, Peace Corps was not properly reporting transactions on the SF 

224, Statement of Transactions.

Business Processes Over Property, Plant & Equipment Were Not Sufficient 

In FY 2004, Peace Corps did not record a value for the General Property, Plant & 

Equipment (PP&E) line item for the year-end financial statements. In FY 2005, Peace 

Corps established a value for the General PP&E line item for the year-end financial 

statements. However, Peace Corps could not provide properly detailed or reconciled 

schedules supporting the General PP&E general ledger account balances. 
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INDEPENDENT AUDITORʼS REPORT 

ON INTERNAL CONTROL, CONTINUED 

REPORTABLE CONDITION 2 (Material Weakness), CONTINUED 

Peace Corps did not have effective policies and procedures in place to ensure a 

supportable and accurate subsidiary ledger supporting the General PP&E balance on 

the financial statements. During the FY 2005 engagement, the following conditions were 

noted:

x The book value for assets acquired in 2005 per the subsidiary ledger was greater 

than the acquisition cost per Peace Corps Property Management System 

(PCPMS). Additionally, capital assets discovered at Headquarters during our 

testing were not listed within PCPMS or on the other PP&E subsidiary ledgers. 

x Errors were found in PCPMS such as incorrect activation dates of assets and 

assets belonging to posts that were suspended or closed. 

x Information Technology (IT) software values recorded in the financial accounting 

records were based on budgeted cost, not actual cost. Also, shipping and 

traveling costs necessary to put IT systems into operable use were recorded 

separately from the related hardware cost. 

x The useful lives, as reported in the PP&E note to the financial statements, were 

not consistently used for all property. 

x Peace Corps did not properly present capital leases in the financial statements. 

We identified the following causes of the conditions described above: 

x Peace Corps did not perform accuracy and completeness checks on their 

General PP&E, Vehicles, IT hardware and IT software prior to bringing the 

property into the financial records. 

x Procedures in place for the PCPMS were not sufficient to ensure assets recorded 

were accurately updated.

x Peace Corpsʼ policies and procedures are not sufficiently comprehensive to 

ensure property managers consider all relevant factors when recording assets. 

For example, Peace Corps incorrectly capitalized budgeted costs instead of the 

actual IT Software. 

x Peace Corps does not have an approved policy outlining useful lives for 

depreciation of PP&E, including IT software. 

x Peace Corps did not have policies, procedures or an approved methodology for 

the capitalization of leases. 

Office of Management and Budget (OMB) Circular A-123, Management’s Responsibility 

for Internal Control states: 

Transactions should be promptly recorded, properly classified and 

accounted for in order to prepare timely accounts and reliable 

financial and other reports. The documentation for transactions, 

management controls, and other significant events must be clear 

and readily available for examination. 
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INDEPENDENT AUDITORʼS REPORT 

ON INTERNAL CONTROL, CONTINUED 

REPORTABLE CONDITION 2 (Material Weakness), CONTINUED 

OMB Circular A-127, Financial Management Systems, Section 7. Financial Management 

Systems Requirements, states: 

b. Integrated Financial Management Systems. Financial 

management systems shall be designed to provide for effective and 

efficient interrelationships between software, hardware, personnel, 

procedures, controls, and data contained within the systems... 

...Efficient Transaction Entry. Financial system designs shall 

eliminate unnecessary duplication of transaction entry. Wherever 

appropriate, data needed by the systems to support financial 

functions shall be entered only once and other parts of the system 

shall be updated through electronic means consistent with the 

timing requirements of normal business/transaction cycles. 

Statement of Federal Financial Accounting Standards (SFFAS) No. 6, 

Accounting for Property, Plant and Equipment states: 

In the period of disposal, retirement from service, general PP&E 

shall be removed from the asset accounts along with associated 

accumulated depreciation/amortization. Any difference between the 

book value of the PP&E and amounts realized shall be recognized 

as a gain or a loss in the period that the general PP&E is disposed 

of, retired or removed from service. 

SFFAS No. 10, Accounting for Internal Use Software states: 

For internally developed software, capitalized cost should include the 

full cost (direct and indirect cost) incurred during the software 

development stage. Such as salaries of programmers, systems 

analysts, project managers, and administrative personnel, associated 

employee benefits, outside consultants' fees, rent, and supplies 

SFFAS No. 6, Accounting for Property, Plant and Equipment states: 

Asset Recognition 

All general PP&E shall be recorded at cost. Cost shall include all 

costs incurred to bring the PP&E to a form and location suitable for its 

intended use. For example, the cost of acquiring property, plant, and 

equipment may include: 

x Amounts paid to vendors; 

x Transportation charges to the point of initial use; 

x Handling and storage costs; 

x Labor and other direct or indirect production costs (for 

assets produced or constructed); 
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INDEPENDENT AUDITORʼS REPORT 

ON INTERNAL CONTROL, CONTINUED 

REPORTABLE CONDITION 2 (Material Weakness), CONTINUED 

SFFAS No. 6, Accounting for Property, Plant and Equipment states: 

Capital leases are leases that transfer substantially all the benefits 

and risks of ownership to the lessee. If, at its inception, a lease 

meets one or more of the following four criteria, the lease should be 

classified as a capital lease by the lessee. Otherwise, it should be 

classified as an operating lease. 

x The lease transfers ownership of the property to the 

lessee by the end of the lease term. 

x The lease contains an option to purchase the leased 

property at a bargain price. 

x The lease term is equal to or greater than 75 percent of 

the estimated economic life of the leased property. 

x The present value of rental and other minimum lease 

payments, excluding that portion of the payments 

representing executory cost, equals or exceeds 90 

percent of the fair value of the leased property. 

Accounts Payable Manual Journal Entries 

In FY 2005, Peace Corps recorded manual adjustments to its Accounts Payable account 

at year end to accrue for goods and services received but not billed to Peace Corps by 

September 30, 2005. Peace Corps posted an unbilled invoices manual journal entry, 

consisting of several accruals, to the general ledger without requiring and reviewing 

detailed corroborating documentation. 

Separately, the accrual process to identify and record goods and services that were 

received in September 2005 was incomplete. While Peace Corps did accrue most of the 

large contracts at year end, there were other invoices paid after year end that were not 

accrued that, when aggregated, may be material. 

GAOʼs Standards for Internal Control in the Federal Government states, 

Control activities are an integral part of an entity’s planning, 

implementing, reviewing, and accountability for stewardship of 

government resources and achieving effective results.... They include a 

wide range of diverse activities such as approvals, authorizations, 

verifications, reconciliations, performance reviews, maintenance of 

security, and the creation and maintenance of related records which 

provide evidence of execution of these activities as well as appropriate 

documentation. 

OMB Circular A-136, Financial Reporting Requirements states, 

3.4 Liabilities 

General Categories. A liability is a probable future outflow or other 

sacrifice of resources as a result of past transactions or events. 
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INDEPENDENT AUDITORʼS REPORT 

ON INTERNAL CONTROL, CONTINUED 

REPORTABLE CONDITION 2 (Material Weakness), CONTINUED 

Financial statements shall recognize probable and measurable future 

outflows or other sacrifices of resources arising from (1) past 

exchange transactions, (2) government-related events, (3) 

government-acknowledged events, or (4) nonexchange transactions 

that, according to current law and applicable policy, are unpaid 

amounts due as of the reporting date. SFFAS No. 5 describes the 

general principles governing the recognition of a liability. 

Business Processes Over Undelivered Orders Were Not Sufficient

Peace Corps was not able to provide all sufficient supporting documentation for 

obligation and disbursement samples selected within the agreed upon time frames. 

Peace Corps management did not ensure the established policies and procedures 

regarding the activity for obligations, accruals and disbursements, and the undelivered 

orders remaining balances were monitored. Peace Corps Headquarters also does not 

have controls in place to ensure Country Directors or Administrative Officers are 

complying with the contracting authority entrusted to them by the Peace Corps. 

The following conditions were noted during the performance of our procedures: 

x Obligations in the Undelivered Orders balance required deobligation. 

x Domestic and overseas disbursements were not properly certified and were not 

paid in a timely manner. 

x Obligating documents were signed after the obligation was created in Odyssey. 

x Peace Corps was obligating more funds than authorized by the contract. 

x Country Directors entered into contracts with vendors or Personal Service 

Contracts for amounts above their spending limits, without proper delegation of 

authority.

OMB Circular A-123, Management’s Responsibility for Internal Control states: 

Management controls are the organization, policies, and procedures 

used to reasonably ensure that (i) programs achieve their intended 

results; (ii) resources are used consistent with agency mission; (iii) 

programs and resources are protected from waste, fraud, and 

mismanagement; (iv) laws and regulations are followed; and (v) reliable 

and timely information is obtained, maintained, reported and used for 

decision making. 

Peace Corps Overseas Financial Management Handbook section 33.1.1 states: 

Country Directors are delegated contracting authority for country of 

assignment or other third country not to exceed fifty thousand dollars 

($50,000) or local currency equivalent per procurement...Contact the 

Director, Office of Contracts if additional delegation is required. 
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INDEPENDENT AUDITORʼS REPORT 

ON INTERNAL CONTROL, CONTINUED 

REPORTABLE CONDITION 2 (Material Weakness), CONTINUED 

Intragovernmental and Governmental Transactions Were Not Properly Classified 

Financial statement reporting requires government agencies to record and report certain 

accounts as either intragovernmental (Federal) or governmental (non-Federal) balances. 

Transactions with other U.S. government agencies are classified as intragovernmental. 

All other transactions are governmental. Prior to 2005, Peace Corpsʼ Balance Sheet and 

Statement of Net Cost did not accurately classify intragovernmental and governmental 

balances for Other Assets, Accounts Payable, and Operating Expenses. In FY 2005, 

Operating Expenses and Other Assets were not divided between intragovernmental and 

governmental. Peace Corps divided Accounts Receivable and Accounts Payable into 

intragovernmental and governmental balances. However, Peace Corps could not 

support the financial statement classification on the Balance Sheet for Accounts Payable 

and Accounts Receivable. 

The Federal/non-Federal distinction is not being utilized at the transaction level within 

the core financial management system, Odyssey, and therefore intragovernmental 

transactions could not be reliably determined for financial statement presentation. 

Although the functionality is in Odyssey to indicate the proper classification at the 

transaction level, this functionality was not used. There is not an automated or alternate 

process in place to distinguish intragovernmental transactions from governmental 

transactions at the transaction level. 

OMB Circular A-123, Management’s Responsibility for Internal Control states, 

Transactions should be promptly recorded, properly classified and 

accounted for in order to prepare timely accounts and reliable financial 

and other reports. The documentation for transactions, management 

controls, and other significant events must be clear and readily available 

for examination. 

OMB Circular A-136, Financial Reporting Requirements states,

3.3 Assets

Intragovernmental Assets. These assets arise from transactions among 

Federal entities. These assets are claims of a Federal entity against 

other Federal entities. Report intragovernmental assets separately from 

transactions with non-Federal entities, the Federal Reserve, and 

government-sponsored enterprises (i.e., Federally chartered but 

privately owned and operated entities). The term "non-Federal entity" 

encompasses domestic and foreign persons and organizations outside 

the U. S. Government. 

Report intragovernmental assets separately from 

transactions with non-Federal entities, the Federal 

Reserve, and government-sponsored enterprises (i.e., 

Federally chartered but privately owned and operated 

entities).... Report intragovernmental liabilities separately 
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INDEPENDENT AUDITORʼS REPORT 

ON INTERNAL CONTROL, CONTINUED 

REPORTABLE CONDITION 2 (Material Weakness), CONTINUED 

from claims against the reporting entity by non-Federal 

entities, including government-sponsored enterprises, 

and the Federal Reserve System. 

3.4 Liabilities 

Liabilities of Federal agencies are classified as liabilities covered or not 

covered by budgetary resources. The intragovernmental liabilities of an 

agency are separately classified on the face of the balance sheet. 

These terms are defined below in accordance with SFFAS No. 1. 

Recommendations

We recommend the Director of Peace Corps ensure that: 

5. The OCFO management establishes policies and procedures in the Peace Corps 

Manual to clarify the reconciliation process for each component of FBWT, 

including the process, responsibility, and timeframes for researching and 

resolving differences reported by Treasury. 

6. The OCFO management monitors the FBWT reconciliation and assign 

responsibilities to compare, and link all reconciliation components. An overall 

reconciliation should be performed that ties all the reconciliations performed 

together and the OCFO should design a formal reconciliation structure which 

allows adequate controls over the FBWT reconciliation process. 

7. The complete Odyssey general ledger cash balance is being reconciled to 

Treasuryʼs FMS 6653 monthly to validate that FBWT is properly reported. 

Management should review the reconciliation and approve any necessary 

adjustments to correct differences.

8. The OCFO develop a standard cash reconciliation report that contains sufficient 

details to allow the reconciliation of disbursements and deposits reported on the 

6653 with the transactions reported on the general ledger. 

9. The OCFO establish processes for the tracking, monitoring, and resolving of 

differences identified in the 6653 reconciliation to ensure the timely resolution of 

identified differences. Peace Corps should also establish a policy documenting 

the review and resolution of previously identified differences found on the 6652 

reconciliation. Tracking and monitoring the corrected differences identified will 

help Peace Corps identify problematic reconciliation areas. 

10. The book values in PCPMS are accurate and periodically reviewed. 

11. The OCFO develop and perform procedures to ensure completeness of all areas 

of PP&E including, vehicles, IT Hardware, IT Software, and General PP&E. 
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INDEPENDENT AUDITORʼS REPORT 

ON INTERNAL CONTROL, CONTINUED 

REPORTABLE CONDITION 2 (Material Weakness), CONTINUED 

12. PCPMS is being updated on a regular basis by appropriate personnel to enable 

management to have the accurate value of PP&E at any time. 

13. The OCFO establishes a policy for correctly capitalizing and depreciating IT 

Hardware and Software, using the standards required by SFFAS 6 and SFFAS 

10.

14. OCFO establishes guidelines for obligating and recording capital leases at Post 

and Headquarters. 

15. Major contracts are reviewed for capital lease agreements in order to properly 

disclose capital leases in the financial statements and footnotes. 

16. OCFO refine the policy guidance about manual entries to include review 

requirements for detailed corroborating evidence, including vendor invoices, 

estimate calculations with source items included for reference.

17. A routine procedure is implemented for OCFO personnel to use a developed 

accrual worksheet/checklist to prepare the period-end accrual.

18. A procedure is developed for tracking and monitoring expenses incurred during 

the fiscal year, in order to estimate an accurate accrual at year end.

19. Policies and procedures are adhered to in order to monitor the activity/inactivity 

for Undelivered Orders. 

20. System reports are utilized or developed that can be used to monitor 

activity/inactivity of Undelivered Orders. 

21. Policies and procedures are adhered to at the Post and Headquarters regarding 

the disbursement cycle. 

22. The OCFO team review and use the Federal and non-Federal classification 

functionality in Odyssey at the transaction level to ensure that the proper 

reporting results can be achieved and then work with the OCFO to ensure this 

classification procedure is included in the policies and procedures.

23. Accounting personnel are properly trained to use the classification function in 

Odyssey for every applicable transaction in early fiscal year 2006, previously 

recorded transactions and balances which have not been classified as Federal or 

non-Federal should be reviewed and properly classified in the system. 
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INDEPENDENT AUDITORʼS REPORT 

ON INTERNAL CONTROL, CONTINUED 

REPORTABLE CONDITION 3 (Material Weakness) 

PEACE CORPS WAS NOT ABLE TO SUBSTANTIATE MATERIAL ACCOUNT 

BALANCES 

Documentation to support account balances is essential to the audit process. Entities 

must maintain supporting documentation to validate that transactions were proper. 

Testing is mainly based on the support for account transactions. In FY 2004, Peace 

Corps was unable to provide adequate accounting records and supporting 

documentation for the Travel Advance beginning balance and Undelivered Orders 

(UDO) beginning and ending balances. Furthermore, Peace Corps expensed all PP&E 

in previous years and first established the asset account balance in September 2005. 

This precluded us from performing sufficient procedures to express an opinion on the 

financial statements. 

As part of the FY 2005 financial statement engagement, we attempted to substantiate 

Peace Corpsʼ beginning and ending balances for fiscal year 2005.

Beginning balances such as Fund Balance with Treasury and Accounts Payable did not 

agree to the beginning balance of the trial balance. We traced the UDO beginning 

balance to the trial balance, but the balance was unsupportable during the previous 

yearʼs engagement. Management was unable to provide additional supporting 

documentation for these balances during the FY 2005 engagement. Peace Corps could 

also not substantiate material year end account balances, namely Fund Balance with 

Treasury, General PP&E, Accounts Payable and UDO. Peace Corps was not able to 

produce auditable subsidiary ledgers together with reconciliations, in a timely manner, 

for all account balances, in part because they do not have standard subsidiary ledgers 

identified for each line item on the financial statements. 

Peace Corps was not able to locate the proper documentation supporting amounts in the 

subsidiary ledger for General PP&E. The Peace Corps could not produce all required 

UDO documentation within the agreed upon time frames. 

The year end adjusting entries for Accounts Payable (which made up the majority of the 

account balance) and Fund Balance with Treasury could not be corroborated. Peace 

Corps also relied on logic formulas to record year end journal entries to manually 

balance the financial statements within Odyssey. 

OMB Circular A-123, Management’s Responsibility for Internal Control states: 

Transactions should be promptly recorded, properly classified and 

accounted for in order to prepare timely accounts and reliable 

financial and other reports. The documentation for transactions, 

management controls, and other significant events must be clear and 

readily available for examination. 
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INDEPENDENT AUDITORʼS REPORT 

ON INTERNAL CONTROL, CONTINUED 

REPORTABLE CONDITION 3 (Material Weakness), CONTINUED 

OMB Circular No. A-127, Financial Management Systems states:

Transaction detail supporting SGL accounts shall be available in the 

financial management systems and directly traceable to specific 

SGL account codes.

SFFAS No. 10, Accounting for Internal Use Software states: 

For internally developed software, capitalized cost should include 

the full cost (direct and indirect cost) incurred during the software 

development stage. Such as salaries of programmers, systems 

analysts, project managers, and administrative personnel, 

associated employee benefits, outside consultants' fees, rent, and 

supplies.

 We recommend the Director of Peace Corps ensure that: 

24. Peace Corps continue to research and locate supporting documentation for the 

balances that are recorded in financial statements. 

25. The OCFO define, and the Director approve, a policy for the approval of final 

disposition of any remaining unsupported balances. 

26. The OCFO amend the record retention policies and procedures to allow for the 

timely production of adequate supporting documentation to substantiate Peace 

Corps financial statement account balances. 

27. The OCFO use the actual contract costs to establish the external contractor 

portion of the internally developed software. Additionally, Peace Corps should 

use an estimated cost for their employeesʼ contribution, in accordance with 

SFFAS No. 10. These internal costs, although estimated, are based on actual 

expense information, that should be clearly documented. 

28. The OCFO research and correct the cause(s) for the year-end adjusting entries 

required to balance certain general ledger accounts. 
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INDEPENDENT AUDITORʼS REPORT 

ON INTERNAL CONTROL, CONTINUED 

REPORTABLE CONDITION 4 (Material Weakness) 

PEACE CORPS DID NOT HAVE ADEQUATE CONTROLS OVER ITS 

RECONCILIATION AND FINANCIAL REPORTING PROCESSES 

Peace Corpsʼ management does not have adequate management oversight and 

monitoring controls to ensure the propriety of general ledger transactions, account 

reconciliations and adjustments entered into its accounting system and reported in the 

financial statements. In FY 2005, the Peace Corps continued to rely heavily on 

consultants to perform duties affecting financial information that are ultimately Peace 

Corpsʼ responsibility. Peace Corps staff responsible for the financial statement 

compilation and reporting process did not have a sufficient working knowledge of (1) 

governmental accounting standards, (2) OMB reporting requirements, or (3) how the 

consultants applied these standards and requirements in the financial statement 

compilation, to provide sufficient oversight over the process. 

Peace Corps developed and performed extensive processes (specialized Excel 

worksheets, data downloads and manipulations, and derived accounting adjustments) to 

generate financial information and Odyssey was unable to perform these functions in 

order to prepare perpetual financial statements and to monitor financial accounts activity. 

In addition, in certain instances, Peace Corps relied on logic formulas instead of sound 

research to record year end journal entries that were material to some accounts. This 

condition also existed in FY 2004. Odyssey continued to lack the capability to generate 

(1) financial statements, (2) data relevant to financial notes, and (3) perpetual financial 

statement data for management to use as monitoring mechanism throughout the fiscal 

year (i.e. account relationships which were out of balance and fund year imbalances). 

The presentation and disclosure of Peace Corps financial results were not in accordance 

with OMB Circular A-136 and applicable government accounting standards. There did 

not appear to be effective quality control over the financial reporting process. 

OMB Circular A-127, Financial Management Systems states:

The agency financial management system shall be able to provide 

financial information in a timely and useful fashion to (1) support 

management's fiduciary role; (2) support the legal, regulatory and other 

special management requirements of the agency; (3) support budget 

formulation and execution functions; (4) support fiscal management of 

program delivery and program decision making, (5) comply with internal 

and external reporting requirements, including, as necessary, the 

requirements for financial statements prepared in accordance with the 

form and content prescribed by OMB and reporting requirements 

prescribed by Treasury; and (6) monitor the financial management 

system to ensure the integrity of financial data. 
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INDEPENDENT AUDITORʼS REPORT 

ON INTERNAL CONTROL, CONTINUED 

REPORTABLE CONDITION 4 (Material Weakness), CONTINUED 

The Joint Financial Management Improvement Programʼs, Framework for Federal 

Financial Management Systems states,

Financial management systems must process, track, and provide 

accurate, timely, internally consistent, and readily accessible 

information on financial activity in the most cost effective and efficient 

manner. These systems should not only support the basic accounting 

functions but must also be the vehicle for integrated budget, financial 

and performance information that managers use to make decisions on 

their programs. 

OMB Circular A-123, Management’s Responsibility for Internal Control states: 

Managers and employees must...maintain a level of competence that 

allows them to accomplish their assigned duties.... Managers should 

ensure that appropriate authority, responsibility and accountability are 

defined and delegated to accomplish the mission of the organization, 

and that an appropriate organizational structure is established to 

effectively carry out program responsibilities. To the extent possible, 

controls and related decision-making authority should be in the hands of 

line managers and staff. 

GAOʼs Standards for Internal Control in the Federal Government states, 

Control activities are an integral part of an entity’s planning, 

implementing, reviewing, and accountability for stewardship of 

government resources and achieving effective results.... They include a 

wide range of diverse activities such as approvals, authorizations, 

verifications, reconciliations, performance reviews, maintenance of 

security, and the creation and maintenance of related records which 

provide evidence of execution of these activities as well as appropriate 

documentation. 

Recommendations

We recommend the Director of Peace Corps:

29. Assesses and takes the necessary actions to ensure the staff assigned to the 

financial statement compilation and reporting process have or are capable of 

having a sufficient working knowledge of (1) governmental accounting standards, 

(2) OMB reporting requirements, and (3) how these standards and requirements 

should be applied in the financial statement compilation, to provide sufficient 

oversight over the process and take appropriate corrective action (i.e. provide 

training, re-assignments). 

30. Completes the development of, approve and implement policies, procedures and 

guidance to be followed for financial statement compilation and reporting. This 
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INDEPENDENT AUDITORʼS REPORT 

ON INTERNAL CONTROL, CONTINUED 

REPORTABLE CONDITION 4 (Material Weakness), CONTINUED 

should include: (1) the establishment of a combined OCFO systems and 

operational team tasked to evaluate the processes used to compile the financial 

statements; (2) the Peace Corps staff gaining an understanding of the Peace 

Corps Financial Statement Generator (PCFSG); (3) the development of a 

monitoring framework to ensure the financial information is compiled in 

accordance with Peace Corps approved policies and procedures. 

31. Ensures the OCFO establishes, documents and implements internal control and 

review procedures over the financial statement compilation and reporting 

process.

32. Ensures OCFO management review support for adequacy and completeness for 

deficiencies in the documentation that support the balances that make up the 

financial statements and ensure the deficiencies are always researched and 

resolved.

33. Ensures OCFO management review the support and authorize in writing all 

adjustments incorporated into Peace Corpsʼ financial statements. Further, Peace 

Corps management should define specific procedures related to the financial 

statement preparation process, including preparing adequate supporting 

documentation for adjusting entries. 

34. Finalizes and implements accounting and reporting policies and procedures 

throughout Peace Corps. These policies should include responsibilities and 

required reconciliations for each line item on the financial statements. 

35. Ensures the OCFO completes a comprehensive review of each individual line 

item in the financial statements (including the supporting notes) against OMB 

guidance and governmental accounting standards to ensure the presentation and 

disclosure meets the federal requirements. 
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INDEPENDENT AUDITORʼS REPORT 

ON INTERNAL CONTROL, CONTINUED 

REPORTABLE CONDITION 5 (Material Weakness) 

PEACE CORPS DID NOT HAVE ADEQUATE CONTROLS OVER ITS INFORMATION 

SYSTEMS CONTROL ENVIRONMENT 

Peace Corps made improvements within its information systems control environment 

during FY 2005. However, we noted the following significant internal control 

weaknesses related to Odyssey, the FOR Post/HQ systems and Peace Corps Overseas 

IT environment that present risk to financial data confidentiality, integrity, and availability. 

Specifically: 

x The Peace Corps IT Recovery Plans had not been completed and did not reflect 

the current IT environment. For example, the plans did not include recovery 

information for the new Odyssey or FOR Post/HQ financial systems. Therefore, 

the Odyssey and FOR Post/HQ systems did not have a contingency plan in 

place. Without contingency planning in place, the risk of loss of data and 

operations for an unnecessary, extended period of time within Peace Corps 

financial systems is increased. 

x The Odyssey and FOR Post/HQ systems had not been fully certified and 

accredited and only had an Interim Authority to Operate (IAO). Without the 

application-specific certification and accreditation statements, management 

cannot be assured that security responsibilities and controls are adequately 

documented, disseminated, and monitored. Additionally, proper security may not 

be administered over the data within the Peace Corps financial systems. 

x During the last two years, the Peace Corps overseas IT budget decreased 

significantly. This contributed to an increased risk that security vulnerabilities 

and flaws will not be addressed in a manner that will minimize or prevent security 

risks. Furthermore, the lack of a sufficient training budget may result in 

employees lacking critical knowledge in the area of IT security, and increases the 

probability of security vulnerabilities not being addressed. 

Peace Corps overseas Posts had insufficient resources for adequate software 

and hardware support and security training for IT personnel. The following 

specific issues were noted: 

o Post anti-virus software had reached its end-of-life and was no longer 

supported by the vendor. However, the vendor will continue to send virus 

definition updates. 

o NT became fully unsupported as of December 31, 2004. Currently, the 

vendor is only supplying critical security fixes to the platform and most 

third party vendors do not support the platform for their products. 

o Post back-up software was no longer supported. 

o Post proxy server was no longer supported. 

o Budget for training, security, or otherwise, of IT personnel was currently 

non-existent.
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INDEPENDENT AUDITORʼS REPORT 

ON INTERNAL CONTROL, CONTINUED 

REPORTABLE CONDITION 5 (Material Weakness), CONTINUED 

x The Overseas Post Microsoft® Small Business Server (SBS) and workstations 

had vulnerabilities that were mainly due to non-current system and security 

patches. The SBS server was open to exploitable vulnerabilities that could have 

an adverse affect on Peace Corps data. 

x Peace Corps was sharing and exchanging information maintained within the 

Odyssey financial system with external entities without a Memorandum of 

Understanding (MOU) stating the terms and conditions as to how the data may 

be used by each entity.

x Peace Corps did not currently have a finalized Continuity of Operations Plan 

(COOP). Without having a COOP, Peace Corps cannot fully ensure the essential 

Agency functions are able to continue in the event of a major disruption to its 

operations.

x Peace Corps was not adequately monitoring the activities of Odyssey system 

programmers to ensure proper accountability. 

x Peace Corps had not developed test plan standards for all levels of testing for 

proposed Odyssey system configuration changes. Test plans help to ensure all 

critical scenarios of a new implementation or change have been adequately 

tested and define the responsibilities for each party, such as users, system 

analysts, programmers, and quality control. 

OMB Circular A-130, Management of Federal Information Resources, Appendix III,

requires systems and applications used by an agency to operate effectively and provide 

appropriate confidentiality, integrity, and availability, through the use of cost-effective 

management, personnel, operational, and technical controls.

OMB Circular A-130 also requires agencies to implement and maintain contingency 

planning as a requirement of a security program. OMB requires agencies to establish 

and periodically test the capability to continue providing service within a system based 

upon the needs and priorities of the participants of the system. 

Additionally, NIST 800-18, Guide for Developing Security Plans for IT Systems, requires 

a contingency plan to be in place prior to authorizing a system for processing. 

Procedures are required to be in place that will permit the organization to continue 

essential functions if information technology support is interrupted. These procedures 

(contingency plans and disaster recovery plans) should be coordinated with the backup, 

contingency, and recovery plans of any general support systems, including networks 

used by financial applications. 

The Peace Corps MS 542, Peace Corps IT Security Policies and Procedures, states the 

following regarding the Certification and Accreditation of an information system: 
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INDEPENDENT AUDITORʼS REPORT 

ON INTERNAL CONTROL, CONTINUED 

REPORTABLE CONDITION 5 (Material Weakness), CONTINUED 

An agency computer or network system that contains sensitive 

information shall not be put into operation unless it has conditional or 

unconditional certification and accreditation, or has been granted an 

Interim Authority to Operate (IAO) or a waiver. 

OMB Circular A-130, Appendix III, also states the following regarding accreditation of 

information systems:

Security accreditation provides a form of quality control and challenges 

managers and technical staffs at all levels to implement the most 

effective security controls possible in an information system, give 

mission requirements, technical, operational and cost/schedule 

constraints. By accreditation of an information system, an agency 

official accepts responsibility for the security of the system and is fully 

accountable for any adverse impacts to the agency if a breach of 

security occurs. Thus, responsibility and accountability are core 

principles that characterize security accreditation. 

The Peace Corps MS 542, Peace Corps IT Security Policies and Procedures, states the 

following regarding Memorandum of Understandingʼs (MOU): 

No Peace Corps computer or network shall be connected to, or have 

the capacity to be directly connected to, any non-Peace Corps 

organization, unless the organization has the following security 

measures in place: MOU that sets out the terms, configurations and 

dates when the connections and the security safeguards will be in 

place.

Executive Order 12656 [Section 202], Assignment of Emergency Preparedness 

Responsibilities, requires that the head of each Federal department and agency shall 

ensure the continuity of essential functions in any national security emergency by 

providing for: succession to office and emergency delegation of authority in accordance 

with applicable law; safekeeping of essential resources, facilities, and records; and 

establishment of emergency operating capabilities during a national emergency. 

Presidential Decision Directive 67, Enduring Constitutional Government and Continuity 

of Government Operations, requires Federal agencies to develop continuity of 

operations plans for essential operations. The plans identify those requirements 

necessary to support the primary function, such as emergency communications, 

establishing a chain of command, and delegation of authority during a national 

emergency. 

OMB Circular A-130, Appendix III, also states the following regarding system 

accountability: 

Incorporate controls such as separation of duties, least privilege and 

individual accountability into the application and application rules as 
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INDEPENDENT AUDITORʼS REPORT 

ON INTERNAL CONTROL, CONTINUED 

REPORTABLE CONDITION 5 (Material Weakness), CONTINUED 

appropriate. In cases where such controls cannot adequately protect 

the application or information in it, screen individuals commensurate 

with the risk and magnitude of the harm they could cause. Such 

screening shall be done prior to the individuals' being authorized to 

access the application and periodically thereafter. 

The Peace Corps MS 542, Peace Corps IT Security Policies and Procedures, states the 

following regarding system developer responsibilities: 

System designers/developers shall provide test procedures for the 

installations of new software or configurations. 

Recommendations

We recommend the Peace Corps Director ensures that: 

36. The Contingency Plan for Odyssey and FOR Post/HQ is completed and tested at 

least annually or as soon as possible after any significant interim change is made 

to the operating environment. 

37. Full certification and accreditation for the Peace Corps Odyssey and FOR 

Post/HQ systems is completed in accordance with Peace Corps policy and OMB 

Circular A-130 guidance. 

38. A program is developed by Peace Corps Headquarters for distributing patch 

updates to the Posts in a timely manner and the deployment of the overseas 

software refresh is completed for all posts. 

39. A MOU is in place for each entity/agency system that shares information with 

Odyssey. The MOU should be signed and authorized by appropriate 

management officials and should have all necessary information specified. 

40. An Agency COOP is developed and periodically tested to ensure its 

effectiveness in providing business continuity in the case of an interruption or 

disaster.

41. System programmersʼ activities are monitored by periodically reviewing system 

logs for inappropriate activity. 

42. Test plan standards are developed for each level of testing performed for 

Odyssey system changes. 
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INDEPENDENT AUDITORʼS REPORT ON

COMPLIANCE WITH LAWS AND REGULATIONS 

Director 

Peace Corps 

Office of Inspector General 

Peace Corps 

We were engaged to audit the financial statements of the Peace Corps, an independent 

executive branch agency of the United States federal government, as of and for the year ended 

September 30, 2005, and have issued our report thereon, dated November 8, 2005, in which we 

disclaimed an opinion on those financial statements for the reasons noted in that report. 

The management of Peace Corps is responsible for complying with laws, regulations, and 

provisions of contracts and grants applicable to Peace Corps. As part of obtaining reasonable 

assurance about whether the financial statements are free of material misstatement, we 

performed tests of Peace Corpsʼ compliance with certain provisions of laws, regulations, 

contracts and grants, noncompliance with which could have a direct and material effect on the 

determination of financial statement amounts, and certain other laws and regulations specified 

in Office of Management and Budget (OMB) Bulletin No. 01-02, Audit Requirements for Federal 

Financial Statements, as amended, including the requirements referred to in the Federal 

Financial Management Improvement Act (FFMIA) of 1996. We limited our tests of compliance to 

these provisions and we did not test compliance with all laws, regulations, and provisions of 

contracts and grants applicable to Peace Corps. 

The results of our tests of compliance with certain provisions of laws, regulations, contracts and 

grants described in the preceding paragraph exclusive of FFMIA disclosed an instance of 

noncompliance with the following law that is required to be reported under Government Auditing 

Standards and OMB Bulletin No. 01-02. 

 The Peace Corps is not in compliance with the Federal Managersʼ Financial 

Integrity Act (FMFIA), which requires the agency head to annually evaluate and 

report on the agencyʼs management control and financial systems. The Peace 

Corps has not established a formal process for evaluating its management and 

financial controls. 

Under FFMIA, we are required to report whether Peace Corpsʼ financial management systems 

substantially comply with the Federal financial management systems requirements, applicable 

Federal accounting standards, and the United States Standard General Ledger (USSGL) at the 

transaction level. To meet this requirement, we performed tests of compliance with FFMIA 

section 803(a) requirements. 
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INDEPENDENT AUDITORʼS REPORT ON

COMPLIANCE WITH LAWS AND REGULATIONS, CONTINUED 

The results of our tests disclosed instances, described below, where Peace Corpsʼ financial 

management systems did not substantially comply with Federal financial management systems 

requirements, Federal accounting standards, and the USSGL at the transaction level. The 

Director of Peace Corps is responsible for Peace Corpsʼ financial management systems. 

 Peace Corpsʼ financial management system did not have adequate internal controls 

over contingency plans and data transmission and was not fully certified and 

accredited. The system also lacks functionality to support timely and effective 

reconciliation and review at the transaction level. The financial management system 

is not being used to properly identify intragovernmental and governmental 

transactions. Peace Corps has also identified deficiencies within the systemʼs 

transaction posting logic. 

Specific conditions and recommended remedial actions attributable to these instances of 

noncompliance are more fully described in our Independent Auditorʼs Report on Internal Control, 

dated November 8, 2005. 

Providing an opinion on compliance with certain provisions of laws, regulations, contracts and 

grants was not an objective of our engagement and, accordingly, we do not express such an 

opinion. 

This report is intended solely for the information and use of the management of Peace Corps, the 

Peace Corpsʼ Office of Inspector General, OMB, and Congress, and is not intended to be and 

should not be used by anyone other than these specified parties. 

Washington, DC 

November 8, 2005 


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To: Gaddi Vasquez, Director

From: Allan R. Gall, Acting Inspector General

Date: October 12, 2005

Subject: Management Challenges for the Peace Corps in FY 2006

As required by the Reports Consolidation Act of 2000 and OMB guidance, I am pleased to submit our statement summarizing what the Offi ce of Inspector General (OIG) considers to be the most serious management 

and performance challenges facing the Peace Corps. We have compiled this statement based on our audit, investigative, and evaluation work and our general knowledge of the agency’s operations.

In my fi rst management challenges statement prepared last year, I postulated that the management challenges in FY 2005 and beyond would be: (a) to effect quality programming, training, and technical support for 

Volunteers as the agency’s top priority, (b) to address residual issues in Volunteer safety and security, (c) to make 

hard choices between growth and quality, (d) to weigh the pull of requests for programs in countries with compelling need in which the agency is not currently working against the draw of maintaining programs in all of the 

currently served countries, (e) to improve the agency’s budget development and implementation processes, (f) to 

complete the upgrades of IT systems, and (g) to move the agency’s fi nancial management from a transactional 

processing focus to a fi nancial management focus. While we saw some progress in some of these areas, all of 

them remain in the sphere of management challenges as outlined below. 

Programming: Meeting the Agency’s Mission

The fi rst of the three goals articulated in the Peace Corps Act is “...to help the peoples of such countries and 

areas in meeting their needs for trained manpower, particularly in meeting the basic needs of those living in 

the poorest areas of such countries...” The agency’s challenge is to design programs that constructively engage 

Volunteers in meeting needs. Volunteers must be engaged in activities they are qualifi ed or trained to perform 

in a structure in which their purpose in the community is clear to them and to the local people. This is the most 

important element in Peace Corps Volunteers’ experience that contributes to their safety and security and makes 

their two years of service satisfying. 

Because most of the Volunteers are not recruited with specialized skills, country staff must develop programs 

that can utilize generalist skills. To be effective, these projects require that Volunteers have concrete activities 

and roles and that the Peace Corps staff conduct rigorous site selection, nurture sponsoring agencies and counterparts, and provide exemplary technical training and support for Volunteers. This is challenging, staff-intensive work. 
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Unfortunately, we still find overseas posts that place Volunteers in projects with little structure. In these programs, Volunteers often report that their host country sponsors are unclear, uninterested, or inadequately prepared to work with them. Some Volunteers in that situation thrive and become the “super Volunteers” whose 

success is used to justify their program, but this is unfair to Volunteers who do not have much success in unstructured settings or, if they succeed, may do so only after many months of frustration. Others terminate their 

service early. Country directors, program staff, and agency management sometimes defend Volunteers’ underemployment in projects by pointing to their sometimes extensive self-reported involvement in “secondary” projects. This posture acknowledges that the project and site development for which the agency pays staff was not 

adequately carried out. 

We find that lack of meaningful work is closely linked to early termination, travel out of site, feelings of isolation, 

and risky behavior. Volunteers with meaningful work are more likely to stay in their communities where they 

are safe.1 Staff expend considerable effort to enforce policies designed to keep Volunteers at their sites. But we 

find that the most important influence is not the policy and how well it is enforced. It is the self-motivation of 

Volunteers who feel they are making a contribution to meeting needs and are engaged with local partners in that 

endeavor. 

The challenge for agency management is to make goal one a reality for all of its Volunteers and hold country directors accountable to place Volunteers in well-defined assignments for which the Volunteers are prepared and 

for which local people are expecting to work with them. Meeting the needs of local people requires a partnership 

with interested and supportive host country colleagues. There is no partnership when Volunteers’ assignments 

are not obvious to the members of their community and workplace.

Training

The challenge for management in Volunteer training is in technical preparation. The majority of Volunteers 

report that their technical training fails to provide them with the skills2 they need for credibility in the work 

they are asked to do. This is not surprising considering that the Peace Corps is recruiting mostly young people 

without training in the work they will be expected to carry out in their projects. The pre-service training period—typically 8 to 12 weeks—is not much time in which to teach language, culture, and technical skills. For 

projects in which Volunteers will be expected to use skills they arrive without, the technical training has to be 

exceptionally good to transfer the skills that may be needed. Programming and training need to be done each 

in the context of the other. The agency’s challenge is to develop projects that meet the needs of the countries and 

can be carried out by Volunteers who can be given the skills needed in a short training period. 

The agency, rightly, prides itself on its language training, and Volunteers most often give their language training high marks. But in a number of countries, the lingua franca spoken and taught to Volunteers in pre-service 

training is not the language used by the people the Volunteers must work with, especially in some of the programs like health education where communication is the task, but the audience is uneducated. The challenge is 

to identify sites early so that Volunteers can receive training in the local language of their prospective sites. Early 

site development is a major challenge in many countries. 

1 In our surveys and interviews, Volunteers report their site as the place where they feel safest.

2	 Posts that have reduced pre-service training from the common standard of 12 weeks to as low as 8 weeks have increased their in-service

training in length of time and in amount of time devoted to technical skill training.
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 On-the-Job Technical Support 

A significant challenge for the agency is to improve technical support. Volunteers report that site visits by their 

program managers are inadequate in number and content. This situation is exacerbated on occasions when 

country directors accept additional Volunteers but do not receive authority and money to increase program staff. 

A further challenge that could positively impact posts’ capacity to support Volunteers is reform of headquarters’ 

program paperwork requirements to reduce their size, number, and complexity and make them easy to prepare 

and accurately reflect what Volunteers do. Project plans have lofty goals with extensive laundry lists of objectives and Volunteer tasks to be accomplished that do not reflect what we find in the field, do not reflect what the 

Volunteers are likely to undertake, and do not bear a relationship to the quality of the projects and the quality 

of the Volunteers’ experience and contribution to their host communities. Most of the program staff are foreign 

nationals. English is not their first language. Sometimes the reports are rewritten by desk officers. Volunteers 

submit statistics they think are expected. Overseas staff sometimes “guesstimate” because the Volunteers do not 

submit reports. The statistics reported in status reports and the attempts at quantification are suspect at best.

The narratives contain formulaic language that posts have learned will get approval from headquarters. We find 

the documentation required of posts—project plans, project status reports, agency initiative reports, project proposals, and trainee status reports—can be well-written without representing the programs on the ground.

We find overseas program staff stretched thin and frustrated with the time spent responding to the administrative requirements of the agency that take time away from Volunteer support, host country partner relationshipbuilding, and site development. The challenge is to re-think how the agency can meet its reporting requirements 

to OMB that is less burdensome, more accurate in reflecting what is happening in the field, and is a tool the 

overseas posts can use to improve their programs. 

Overseas program staff also feel under-appreciated and inadequately recognized. Country directors meet annually to share information and receive support and direction. Administrative officers and safety and security 

coordinators have meetings for similar purposes that provide them with on-the-job training. Medical staff have 

continuing medical education conferences to maintain their professional qualifications. The program staff, who 

are responsible for implementing goal one of the agency, have not had equivalent (in number and regularity) professional support/guidance/training/sharing meetings. Such meetings demonstrate the agency’s commitment to 

them; provide recognition and support; and foster professionalism, morale, and dedication. The challenge for the 

agency is to fit this need into its resource allocation scheme. 

Volunteer Safety and Security

In our overseas post evaluations, we find concrete evidence of the agency’s efforts to strengthen the systems 

that support Volunteer safety and security. This is most clearly manifest in the agency’s commitment of staff resources, e.g., the new position of safety and security coordinator (SSC) at each post to assist in implementing the 

safety and security procedures prescribed in the Peace Corps Manual. We find that most posts have expended 

considerable effort on the requirements of the manual. We also find, however, that some aspects of it are incompletely implemented and that the emergency action plans are almost always tested under optimum conditions. 

The qualifications of SSCs vary greatly. Some are highly qualified and have a professional leadership position at 

the post on safety and security. Others have no professional background and perform a clerical function in the 

compliance aspects of the manual’s requirements. 
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The challenges for the agency with regard to Volunteer safety include: 

• Assuring that the considerable resources devoted to safety and security positively affect Volunteers’ safety. 

• Reducing the occasional risky behavior of some Volunteers.3

• Accommodating the impact of increasing numbers of young females as a percentage of the Volunteers in the 

field.

• Reducing the hazards for Volunteers during in-country travel.

• Improving the safety of Volunteers in capital cities when visiting the Peace Corps office or if assigned to 

work in a capital city.4

• Finding a resolution to providing legal support for Volunteers who are victims of violent crimes.

Money as a Program Challenge

An increasing challenge is for programs to plan for the fact that non-Peace Corps money is progressively more 

available to Volunteers for projects, and Volunteers are taking advantage of this. Some of the money is available 

through other donor agencies in the countries where Volunteers work, and some is available through the Peace 

Corps as small project assistance (SPA) funds from USAID, the ambassador’s fund, funds raised by Volunteers’ 

friends and family, and funds raised from private corporations. In some countries and in some projects, this 

leads to an expectation that Volunteers will be a source of funds. This is particularly a problem for Volunteers 

assigned to assist local, nongovernment organizations that depend exclusively on foreign sources for funding. 

Volunteers feel pressured to be fund-raisers—which may be fine if that is understood by everyone up front—but 

is a problem when the Volunteers find this out only after arriving at site, sometimes after being assured that they 

will not be expected to raise money. The programming challenge to Peace Corps staff is to confront the phenomenon of donor money as it develops programs and designs training. It needs to be part of the plan, not a revelation to the Volunteer once at site. 

Managing Resources from Other Agencies: The President’s Emergency Plan for AIDS Relief 

(Emergency Plan)

A new challenge for the agency is the use of the funds the agency receives under the Emergency Plan. The 

Emergency Plan funding is made available to participating U.S. government agencies, of which the Peace Corps 

is one, through a planning process managed by the ambassador in each country for which funding is being made 

available. For FY 2004, six countries in which the Peace Corps has programs were eligible for the Emergency 

Plan funds. The planning process resulted in a country operating plan (COP) that defined the purposes for 

which the money would be used by each participating agency and the amount. The Peace Corps country director 

in each of the participating countries was a member of the team to develop the COP. We audited the Emergency 

Plan expenditures in four of the six Peace Corps countries that received funds in FY 2004. We found that the 

country directors had been given little guidance from the agency on purposes for which they might propose 

funding in the COP negotiations. We found no oversight of how the funds were spent. And in two countries, we 

found significant amounts of the funds spent for purposes not specified in the COP. Oversight of the agency’s 

participation in the Emergency Plan and of the expenditure of Emergency Plan funds is a management challenge for the agency. 

3 The most common problems reported by Volunteers of their peers are alcohol abuse, promiscuous sexual behavior, and some drug use. The

comfort level that Volunteers come to feel in the local language and culture can lead them to disregard precautions they have been trained to

take. Many of the incidents of harm to Volunteers are associated with risky behavior. 

4 We consistently advise against the assignment of Volunteers to capital cities. 
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Leadership and Management

Our program reviews suggest that the biggest challenge for country directors is program leadership—serious 

time spent on program development, on assuring that Volunteers are arriving to assignments that are real and 

will challenge them to use their talents for significant hours per week. This is hard work. No one receives training in this. No one has a degree in this. Few people have relevant experience. Even country directors who were 

once Volunteers may not have had a Volunteer experience that is applicable to the situation today in the country 

to which they are posted. In some cases, their Volunteer experience may be a hindrance if they perceive their experience to be transferable to others. A new country director will not likely hear from the staff that a program is 

weak. What has been done is what the local staff know how to do and feel is expected of them. The challenge for 

all country directors is to concentrate on what the Volunteers are doing, how they are prepared to do it, and how 

they are supported in doing it. The challenge is to get this message out as the agency’s principal management 

task, to support country directors in doing it, and to hold country directors accountable. 

This administration began with two challenges: one from the President to increase the number of Volunteers 

in the field, and one from GAO to focus on Volunteer safety and security. The agency has met the first challenge 

and put significant resources into demonstrating its commitment to meeting the second. The new challenges are 

more difficult. On the safety and security front, procedures and manual sections are in place, safety and security 

staff are in place, and the message that safety and security is the agency’s top priority is in place. The challenge 

now is to put programs in place that keep Volunteers safe by engaging them in their work. This will require more 

staff devoted to program development, site development, Volunteer technical training, and Volunteer field support. This will require a message from headquarters to country directors that this is their principal task, not 

because it is more important than safety and security but because it is fundamental to safety and security. This 

challenge will be difficult to meet with the number of program support staff currently on board overseas. Absent 

a significant increase in appropriations, hiring more local program staff will require at least a moderate realignment of resources. 

Budget Development and Budget Execution

Management responded—at considerable cost—to a GAO report, which concluded that the agency did not have 

adequate systems in place to assure the safety and security of Volunteers. The agency created new positions 

throughout the agency, including a new associate director’s office for safety and security, a safety and security 

coordinator in every post overseas (70+), and regional safety and security coordinators at headquarters and in 

nine geographic areas overseas. In addition, the emphasis on e-government in all federal agencies over the past 

half decade has presented significant new costs for systems and security. New legislative requirements for information technology security and fiscal accounting discussed later in this document are also new draws on agency 

resources. Finally, costs for operations in many of the agency’s 70+ programs overseas have been affected by a 

weak dollar. 
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The agency’s commitment to growth in this environment of only moderate increases in appropriations and new 

outlays has created a taut budget environment. There are signs in some of the 70+ programs overseas that belts 

have been tightened too severely. In our assessments of overseas posts, we find even routine operating expenditures being delayed or cut, and requests to headquarters for unanticipated costs—or even costs associated with 

increased numbers of Volunteers in the field—being rejected. 

A tight budget increases the challenge to develop an accurate budget, to distribute resources effectively, to monitor expenditures carefully, to make adjustments as needed, and, in particular, to do these things through transparent and user-friendly processes. The analysis of needs also requires the scrutiny that transparency fosters. 

The assessment of across-the-board cuts as a tool for managing tight resources disproportionately hurts some 

operations, particularly small overseas posts and posts with a history of submitting trim budgets. Recent history 

suggests that the FY 2006 appropriation will fall short of the President’s request, increasing the urgency to make 

the budget development and execution processes transparent and user friendly. 

A concomitant challenge exists to institute improved procedures for monitoring expenditures. The existing 

controls sometimes do not flag obvious questionable payments by overseas posts. Overseas, we regularly find 

cashiers and alternate cashiers who have not taken or not passed the cashier’s exam, and administrative officers 

responsible to oversee cashier operations who have not taken the cashier supervisor exam. In addition, the agency’s big dollar expenditures require analysis for savings. 

Information Technology

The Peace Corps has continued to make some progress on the improvement of its information technology architecture and security management. This year, the agency began to roll out a new information technology architecture at the agency’s 70+ overseas posts. In addition, the agency continued with its investment review board 

which was reconstituted in FY 2004 to review major information technology projects. However, a number of 

challenges noted last year still need to be addressed, most notably:

• Many of the agency’s information systems have not received their final certifications and accreditations for 

use.

• System life cycle development and change management practices have not yet been fully institutionalized. 

• Business continuity contingency planning and testing, while ongoing, has not reached the level where all the 

agency’s critical activities could be recovered during a major disruption. 

• Management controls and funding need to be in place to provide annual information technology 

security awareness training to all agency personnel, especially those employees with significant security 

responsibilities. 
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Financial Management

As noted in our FY 2004 management challenges, one of the biggest challenges the agency’s financial management team would face in FY 2005 would be the transition from a transactional processing focus to a financial 

management focus. This transition is a significant cultural change for the agency and additional progress has 

been made towards this objective. For example:

• Agency financial personnel are more familiar with, and capable in, the use of the new financial accounting 

system’s capabilities. 

• Agency financial personnel are more cognizant and receptive of requirements to appropriately justify and 

document the basis for financial transactions. 

• Significant improvements were made over last year in generating and reconciling subsidiary ledgers to 

the general ledger accounts and in the reconciliation of fund balances in the agency’s records with those 

recorded by the U.S. Treasury.

• The Director approved an interim reorganization of the Office of the Chief Financial Officer in September 

2005. This interim reorganization was designed to further streamline the roles and responsibilities of the 

financial management team in order to facilitate proper accounting and reporting practices. While we 

believe this is a significant step forward, additional alignment of staff skills to work responsibilities needs to 

be considered in FY 2006.

The agency continues to face the challenge of hiring and retaining personnel with the appropriate skills and experience in the areas of financial operations and financial management. In our opinion, little progress has been 

made to develop a comprehensive strategy to hire experienced staff, reduce staff turnover, or mitigate the effects 

of staff turnover that occurs in the financial operations. Staff turnover will continue to negatively affect the 

agency’s ability to implement sound financial management. 

Additionally, the agency continues to face significant challenges over the process of preparing and presenting the 

financial results of the agency. These challenges include: 

• Setting policies and procedures in place that enable the staff to systematically manage the financial 

reporting process. 

• Strengthening internal controls to ensure the integrity of the data processed and reported. 

• Developing additional reporting tools that facilitate financial management and reporting. 

• Staffing the responsible units with personnel who have in-depth knowledge of federal accounting and 

federal accounting standards to oversee the compilation and presentation of the agency’s financial 

statements.

Overall, the agency needs to make significant changes to manage the financial reporting process throughout the 

year via a comprehensive approach that ensures accounting standards are followed throughout the quarterly and 

year-end financial statement reporting process. 
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FECA Costs

Over the past year, we have begun to review the agency’s FECA caseload. The Peace Corps has the highest FECA 

costs of any federal agency as a percentage of its budget. The agency has already responded to the challenge by 

increasing its scrutiny of claims when first presented. This is the primary point at which due diligence can pay 

dividends. Also, the agency’s Office of Medical Services has collaborated with us in reviewing case files for potential fraud. These are important first steps. A major challenge for the agency that comes out of this work is to 

consider the impact on the application process. When an applicant is accepted with a medical condition such 

as an emotional, back, neck, limb, or joint problem that does not preclude service, the potential for that medical 

condition to be exacerbated by two years of Volunteer service is high. 

Conclusion 

While some progress has been made on some of the challenges summarized above, I believe the challenge of 

programming, training, and technical support to Volunteers in particular remains prescient and is the bedrock 

challenge for the agency. This is job one. 

Some positive steps were taken over the past year:

• The Director announced on several occasions that programming was to be the top priority for the agency for 

FY 2005. 

• The Director established an “assessment team” model to review programs and address management issues. 

• Programming received prominence in the agendas of the agency’s conference for country directors in each of 

the three operational regions. 

• In several countries where our program evaluations found serious weaknesses, the response by management 

gives us confidence that they are serious about strengthening the programs. Examples include Kiribati, the 

Philippines, and the Federated States of Micronesia. 

• We found mostly excellent programs in the Dominican Republic, Bulgaria, Zambia, and Chad. 

Nevertheless, in our program evaluations we continued to find projects for which assignments were ill defined 

and Volunteers and local people were unclear about what was expected. Unfortunately, in some cases, we did not 

find commensurate concern by management that this was unacceptable. In the Office of Inspector General, we 

do not expect to find perfection. What we hope to find is managers and staff who will respond vigorously to correct problems and a consistent message from headquarters regarding the priority and expectation of excellence 

in programming and training. 
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From: Gaddi H. Vasquez, Director

To: Allan R. Gall, Acting Inspector General

Date: October 26, 2005

Subject: Response to October 12, 2005 Memorandum on 

 ‘Management Challenges for the Peace Corps in FY 2006’

Thank you for your memorandum of October 12, 2005, on the management and performance challenges faced 

by the Peace Corps, as required by the Reports Consolidation Act of 2000 and OMB guidance.

As the Offi ce of the Inspector General carries out its purpose of preventing and detecting fraud, waste, abuse, 

and mismanagement and promoting economy, effectiveness, and effi ciency in government, the agency continues 

its commitment to resolve outstanding issues and recommendations from the Inspector General’s offi ce.

The Inspector General’s memo highlights numerous areas of challenge for the agency as it continues to strive for 

excellence in an ever-changing world environment. While the Inspector General’s letter brings forward various 

important issues for discussion, the agency also recognizes that signifi cant progress has been made in the past 

year.

I would like to take this opportunity to address the broad issues raised in the Inspector General’s letter.

Overall Budget

In FY 2005, the Peace Corps reached a historic high of 7,810 Volunteers serving in the fi eld. This achievement 

is a result of previous years’ work to recruit, train, and place Volunteers in the fi eld. While the Peace Corps has 

received budget increases that have made growth possible, the annual appropriations amounts have been signifi cantly less than the President’s request levels that called for more aggressive growth. Thus, the agency has 

adjusted its strategic planning accordingly and adopted a model of gradual expansion to 8,000 Volunteers by 

FY 2008. 

As posts look to expand, the Peace Corps uses an integrated planning and budget system (IPBS) process to outline the appropriate staff levels necessary to provide a quality experience for an increased number of Volunteers. 

Each post’s IPBS plan is generated in the fi eld, receives careful review at headquarters, and takes growth and 

staffi ng needs into account. As Volunteer levels have increased, the budget amounts going to support direct 

Volunteer operations overseas have increased, from $207 million in FY 2002 to $250 million in FY 2005—a 

20.8 percent increase; while annual appropriations increased 15.3 percent, from $275 million in FY 2002 to 

$317 million in FY 2005. The Peace Corps remains committed to ensuring a quality Volunteer experience and 

providing the support necessary to achieve expansion in an appropriate manner. 
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Programming

A key component of placing Volunteers overseas is to ensure that they have a well-designed job with host country 

support. The agency concurs that programming is an essential component of a positive Volunteer experience, 

and good site development, a Volunteer’s self-motivation, and involvement in the community are key factors that 

contribute to a Volunteer staying safely at his or her site. As the letter indicates in its conclusion, the agency has 

taken many positive steps in the past year to strengthen programming across the board and with more intense 

efforts in countries of specific need. One such example is the new management assessment team that I established, which operates on a proactive basis to help strengthen posts’ operations and to help them address a wide 

variety of challenges at post.

Staff development is important for all staff, including programming staff. While training for program managers 

may more frequently be topic-oriented, such as grief and loss HIV/AIDS training, or sub-regional programming and training instead of an annual conference like those for country directors and administrative officers, 

all three regions report regular training meetings for program staff. Additionally, the agency allocated extra resources from reserves to bring additional programming staff to overseas staff training at headquarters.

Training for Volunteers

As noted last year, the agency does not accept the shortening of pre-service training (PST) or in-service training 

(IST) for budgetary reasons. In following up on this serious matter, the agency provided over $800,000 in additional resources to ensure that Volunteers received the full complement of pre-service and in-service training. 

While PST must include a host of topics, including safety, culture, language, and technical topics, IST is also 

seen as an important time period in which to hone technical skills. 

After a brief period of adjustment and information-gathering at site, Volunteers come together for an in-service 

training when they receive an extended amount of technical training after gaining a context to which the training will apply. The Peace Corps will continue to emphasize the importance of equipping Volunteers with effective training throughout their terms of service in the most efficient and effective way possible. The agency recognizes this area as a challenge for the future as 43 percent of Volunteers identified technical training as an area of 

greater need in PST, and 36 percent said IST technical training was too short. 

Volunteer Support: Site Visits 

The Peace Corps formalized its worldwide guidance in 2004 that recommends a minimum of two site visits 

during the first year (including one visit within the first three months) and one visit during the second year. In 

addition to these minimum guidelines, each post develops country-specific standards on the timing and frequency of site visits that reflects the location and placement of each Volunteer in-country. While the program 

managers who oversee individual Volunteer programming may have the most regular contact, Volunteers may 

also be visited by Peace Corps medical officers (PCMOs), safety and security coordinators (SSCs), or the country 

director. Overall, the Peace Corps has guidance in place to promote frequent visits and contact with Volunteers, 

recognizing that each country must establish its own schedule, reflecting the geography and infrastructure of the 

country.

According to recent biennial Peace Corps Volunteer survey, 82 percent of Volunteers reported they felt they 

received an adequate frequency of site visits by program staff. This survey also indicated that 95 percent of 

Volunteers serving a year or longer reported that they had already received one or more site visits by the program 
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staff member—while nearly 70 percent report two or more visits, and nearly half were visited by the country director. The same survey also indicates that nearly 78 percent of the Volunteers felt these visits by program staff 

included content deemed adequate or more than adequate. However, from another perspective, 22 percent of 

Volunteers reported that they felt their visits with program managers were inadequate. The agency agrees that 

this represents a challenge and is committed to improving both the quantity and the quality of site visits.

Early Termination (ET) Rates

While the most frequently cited reason for early termination is pursuing other career opportunities, the death or 

illness of a close friend or family member and health concerns are cited more frequently than a poorly defined 

assignment. 

The historical ET rate since 1961 has been on a downward trend. The current ET rate of 11.7 percent is still well 

below the last high (20.5 percent in 1970) as well as the historical average ET rate of 13.3 percent. The Peace 

Corps has made significant inroads in expanding data collection on the reasons behind early termination of 

Volunteers by developing a new survey instrument. The ET data initiative has expanded the reporting categories 

from 6 to 51 reasons for resignation in order to gain more accurate data. The data are compiled into a report that 

is produced quarterly, the results of which are used to inform policymakers. Overall, this information provides 

feedback to the posts and headquarters about the reasons behind the ET rate, and has been helpful in analyzing 

the issue.

Agency Administrative Requirements

The agency is currently addressing the issue of streamlining reporting requirements to enhance efficiencies. One 

way in which this is being addressed is through an IPBS re-engineering process to ensure that strategic thinking 

is integrated with well-managed, performance-based budgets that take advantage of the new financial management system and the real-time budget review it offers. Another goal of re-engineering is to streamline information requested from posts into one coherent and useful document, taking into account requirements for agency 

submissions such as the Performance and Accountability Report, the President’s Management Agenda initiatives, the Congressional Budget Justification, and the Performance and Accountability Rating Tool. The work of 

the enterprise architecture team to map out agency structures and information-gathering needs interfaces well 

with the re-engineering process. The outcome should help streamline posts’ reporting requirements and alleviate 

time-consuming staff work. The agency will continue to address this challenge.

Volunteer Safety and Security

The agency standardized the safety and security coordinators’ job descriptions in the spring of 2005. With the 

positions and uniform job descriptions finalized at every Peace Corps post, the Office of Safety and Security 

continues to provide sub-regional training workshops to all SSCs at least every two years. By the end of fiscal 

year 2005, all SSCs were trained by regionally based Peace Corps safety and security officers in emergency action 

plan procedures, incident reporting, Volunteer safety risk factors, and tactics for training Volunteers on sound 

safety practices. These workshops facilitated the uniform communication of safety and security information to 

all posts, while also ensuring that safety and security policies and training curricula were current. The workshops 

were also an excellent forum for all SSCs within a sub-region to collaborate on best practices and for newly hired 

SSCs to understand their roles and develop work plans. The Peace Corps continues to recognize the important 

challenge of ensuring the safety and security of the Volunteers.
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The Peace Corps has been working to strengthen its Volunteer support to minimize high-risk behaviors. In addition, the agency has interviewed overseas PCMOs about Volunteer high-risk behavior and potential underlying 

causes. This has led to the development of pre-service training modules focusing on managing adjustment, loneliness, and personal responsibilities. The Peace Corps began conducting Volunteer in-service and staff training 

on alcohol use in Central Asia and expanded the training to other countries. The agency has also been strengthening its in-country Volunteer support committees. The continuing medical education programs worldwide have 

focused on mental health and adjustment issues and extensive reference materials were prepared for PCMO use 

in-country. 

Money as a Program Challenge

The agency agrees that this issue is a challenge and is working with posts to better prepare Volunteers as they 

encounter such pressures at their sites.

Managing Resources from Other Agencies: President’s Emergency Plan for AIDS Relief

The agency has a clear responsibility to ensure that its efforts under the President’s Emergency Plan for AIDS 

Relief (Emergency Plan) fall within all appropriate policies and guidance from the U.S. Office of the Global 

AIDS Coordinator (OGAC). At the same time, the agency recognizes that the emergency nature of the program 

creates challenges for Peace Corps posts in the field. In FY 2005, the agency established a new global AIDS 

office within the Office of the Director. This new office will provide agency-level policy; overall leadership; and 

general supervision, direction, and coordination of all domestic and foreign HIV/AIDS activities relating to the 

programs (including training) and operations of the Peace Corps. This office will identify and establish attainable goals with a clear framework of accountability, fortifying the agency’s ability to measure and report its successes in the fight against HIV/AIDS.

The establishment of this office reflects the strong commitment of the Peace Corps to be an active and effective 

partner in the global fight against the AIDS pandemic. It is the first of many steps the Peace Corps will take to 

enhance and sustain our involvement in this critical issue over the long term. Through the end of FY 2004, 40 

percent of the Volunteers worldwide worked on HIV/AIDS activities, reflecting the great importance the agency 

places on this issue.

In FY 2005, leading up to the creation of this office, the agency issued Emergency Plan guidance to all involved 

posts, including specific guidance for budget and acquisition issues. The agency takes these matters seriously 

and will work vigorously to ensure the highest standards are met. During the past year, the agency included 

Emergency Plan training for newly selected country directors and administration officers at their overseas staff 

training programs. Also, during a meeting in Ethiopia (May 2005), ten country directors and other post representatives met with headquarters staff several times over a four-day period to discuss and address many of the 

same issues raised in the IG’s letter.

Budget Development and Execution

The letter notes that the agency has had to expend considerable resources in complying with federal mandates 

regarding information technology security and fiscal accounting, as well as the weak dollar. The agency has had 

to use its resources wisely as it balances the current mandates with its on-the-ground programs. During 

FY 2005, the agency provided an additional $5 million to the three regions above their operating budgets for 

costs related to increased trainee inputs, plus an additional $400,000 for hiring field staff to support posts. An 

additional $390,000 was provided for post infrastructure improvements and equipment. At the same time, the 
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agency recognizes the challenge of carefully and prudently managing resources in relation to its mission, and 

will continue its efforts to maintain an appropriate balance that emphasizes overall Volunteer support.

Information Technology and Financial Management

The agency appreciates the acknowledgement of significant steps that have been taken in the fields of information technology and financial management. While much progress has been made, the agency recognizes that 

some challenges are still in the process of being addressed. 

FECA Costs

The agency is pleased that it was able to partner with the Office of the Inspector General in reviewing case files 

that relate to the Federal Employees’ Compensation Act (FECA) for potential fraud. The high level of FECA costs 

is caused, in part, by the nature of the work of Peace Corps Volunteers, their living conditions overseas, and the 

24-hours-a-day, seven-days-a-week assignment. Nonetheless, the agency is committed to ensuring that it is appropriately addressing claims. In fact, with due diligence and collaboration between the IG and the Office of 

Medical Services, the agency was able to identify erroneous charges from the Department of Labor. The agency 

also approved additional resources for a new staff person in OMS to focus on FECA issues.

The agency’s medical clearance process is very rigorous and thoroughly scrutinizes the medical history of each 

applicant. In FY 2005, the agency initiated and completed an extensive review of the extent of medical accommodations and their impact on operations in the field. The results indicated that such Volunteers require the 

same levels of support as other Volunteers. The accommodated Volunteer accounts for the same ratio of support 

(i.e., time burden on staff at post and on post’s financial resources) as the non-accommodated Volunteer. 

Conclusion

The agency is committed to addressing the challenges of operating in the 21st century and is pleased to continue 

to provide Volunteers with a quality experience of service throughout the world.
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Reports under the Peace Corps Act

Peace Corps provides the President with a report 

on operations under the Peace Corps Act, which is 

transmitted to Congress, at least once in each fiscal 

year. Each report contains information describing 

efforts undertaken to improve the coordination of 

activities of the agency with activities of international voluntary service organizations, such as the 

United Nations volunteer program, and of host 

country voluntary service organizations, including:

• A description of the purpose and scope of any 

development project that the Peace Corps 

undertook during the preceding fiscal year as 

a joint venture with any such international or 

host country voluntary service organization; 

and

• Recommendations to improve coordination of 

development projects between the Peace Corps 

and any such international or host country 

service organization.

Other reports

Y

The President shall also include in this report a description of any plans to carry out the policy set forth 

in section 2(b) of this act [22 USCS § 2501(b)].

Semi-Annual Reports

The Peace Corps provides a semi-annual report 

to Congress (IG Report). These cover the periods 

October 1 to March 31 and April 1 to September 

30; and they are due to Congress by May 31 and 

November 30 of each year, respectively.

Congressional Budget Justification

The Peace Corps also submits a Congressional 

Budget Justification (CBJ) to Congress each year 

that is due by March 1.
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aPPendices

aPPendices

X
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X

Policy and Procedures (High Risk)

• Source: FY 2004 audit (Notice of Finding 

[NoF]-03,04,05,07 and 09-FIN-2004).

• Weakness: Some processes are not included in 

Peace Corps documentation (e.g., Peace Corps

Manual, Overseas Financial Management

Handbook (OFMH)) and others need to be 

updated and/or revised. 

• Progress: A series of interim polices and/or 

procedures were disseminated via CFO 

Bulletins and CFO Policy Statements, both FY 

2005 innovations. An extensive revision to the 

OFMH was published in April 2005 to update 

those processes impacted by the deployment of 

the Financial Operations Room for Post (FOR 

Post) system. 

• Remaining Effort: Validate the effectiveness 

of the interim policies and/or procedures and 

revise the applicable manual sections and other 

publications. 

• Time Frame: Ongoing; projected completion 

date of June 2007. 

• Impediments: N/A. 

Property, Plant and Equipment (PP&E) 

(High Risk) 

• Source: FY 2004 audit (NoF-04-FIN-2004) 

• Weakness: Formal accounting records and 

financial statements do not include any values 

for PP&E. 

• Progress: The September 30, 2005, financial 

statements contain values for PP&E and their 

corresponding accumulated depreciation/

amortization. The values were obtained from 

the property accounting system maintained by 

the Office of the Director for Management or 

the best available data for internally developed 

software. 

• Remaining Effort: 

1. Reconcile Odyssey Object Class Code 

31 (acquisition of asset) expenditures to 

additions to the property accounting system 

records. 

2. Reconcile deletions from the property 

accounting system records to collections 

from Proceeds of Sales. 

3. Compute and record gains or losses on 

disposition. 

4. Implement a fixed asset module. 

5. Determine and implement a standard 

methodology for costing internally 

developed software and apply that 

methodology to recalculate the capitalized 

value of Odyssey/FOR Post.

• Time Frames: (1) March 2006; (2)/ (3) June 

2006; (4) TBD and (5) January 2006. 

• Impediments: The Oracle Fixed Asset Module 

does not provide the level of detail necessary for 

property management. 

Financial Reconciliation (High Risk) 

• Source: FY 2004 audit (NoF-09-FIN-2004) 

and FY 2005 agreed upon procedures (AUP) 

• Weakness: A number of general ledger accounts 

(GLACs) are not supported by subsidiary ledgers 

and were not reconciled. The lack of formal 

procedural guidance is discussed under “Policy 

and Procedures.” 

• Progress: Subsidiary ledgers are produced each 

month for most applicable balance sheet and 

budgetary GLACs and high-level reconciliations 

are performed by financial systems personnel 

until the process is stabilized and fully 

documented. A “Report Matrix for Support of 

Standard General Ledger Accounts” showing 

the relationship between subsidiary ledger 

report and GLAC and some procedures has 

been prepared. 

current status of prior audit recommendations 

directly involving financial processes
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• Remaining Effort: 

1. Produce subsidiary ledgers (or comparable 

reports) for the remaining accounts and 

perform monthly reconciliations.

2. Document the remaining reconciliation 

processes and transfer the reconciliation 

function to the Accounting and Reporting 

Directorate on a staggered basis. 

• Time Frames: 

1. March 2006.

2. Commence in December 2005 and 

complete by September 2007. 

• Impediments: Obtaining the resources to staff 

this function and provide the requisite training. 

FOR Post/Odyssey Reconciliation 

(High Risk) 

• Source: FY 2004 audit (NoF-08-FIN-2004) 

• Weakness: Posts are not validating changes 

made to FOR Post transactions transmitted to 

Odyssey. 

• Progress: Specific guidance is contained in the 

Overseas Financial Management Handbook. 

• Remaining Effort: Send an e-mail to 

Administrative Officers: 

1. Requesting their assurance that the 

validations are performed after every sync 

with Headquarters. 

2. Inquiring if they need any additional 

guidance. 

• Time Frame: November 2005 

• Impediments: N/A 

Cash and Check Handling Procedure 

(High Risk) 

• Source: FY 2004 audit (NoF-08-FIN-2004) 

• Weakness: Posts inconsistently accounted for 

checks (prepayments to Volunteers) and cash 

received from the U.S. State Department and 

Peace Corps Headquarters. This resulted in 

unreliable financial statement values. 

• Progress: Management does not agree: 

• Post Cashier Funds belong to the US Treasury 

through the State Department’s accountability. 

Peace Corps will only account for and report the 

transactions that affect Peace Corps accounts. 

• Checks on Hand, created but not delivered, are 

not a liability of Peace Corps because payment 

action is complete and confirmed. These checks 

on hand are an outstanding liability to the US 

Treasury who will make good on the check in 

the event of loss or cancellation. The checks are 

a physical control issue for Peace Corps until 

delivered. Posts are responsible to document 

receipt, inventory and delivery which are an 

internal control issue. 

• Property/Cash held for Volunteers is only a 

possible and not probable liability. Therefore, 

it will be identified as an unfunded contingent 

liability in the footnotes to the financial 

statements. 

• Remaining Effort: Review procedures for 

effectiveness and applicability and determine if 

additional action is required. 

• Time Frame: October 2006 

• Impediments: N/A 

Financial Reporting (High Risk) 

• Source: FY 2004 audit (NoF-01 and 10-FIN2004) 

• Weakness: Peace Corps personnel were 

not sufficiently involved in the reporting, 

reconciliation, and general ledger automated 

adjustment processes and relied on an external 

consultant to perform these functions, with 

minimal in-house understanding of these 

processes. Financial reports were not prepared 

directly from the general ledger. 

• Progress: The Director for Performance 

Reporting and Compliance, a position created 

in August 2005, is responsible for preparing 

financial statements and works closely with the 

external consultant. Material adjustments are 

approved by senior OCFO managers. 
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• Remaining Effort: 

1. Fully document the reconciliation and 

adjustment processes (to include the logic 

governing the adjustment software). 

2. Ensure staff performing compilation 

and review functions have the sufficient 

working knowledge of applicable accounting 

standards and compilation methodologies.

3. Assess the capability of Odyssey to produce 

the financial statements directly from the 

GL. 

• Time Frames: (1) June 2006; (2) June 2006; 

and (3) March 2006. 

• Impediments: Attract, recruit and retain 

qualified staff. 

Supporting Documentation (High Risk) 

• Source: FY 2004 audit (NoF-03 and 06-FIN2004) and FY 2005 AUP

• Weakness: The majority of FY 2004 opening 

balances and a significant number of ending 

balances were not adequately supported. There 

is no policy on dealing with the disposition 

of those balances for which no supporting 

documentation is identified. Responsibilities for 

reconciling with and maintaining supporting 

documentation were nonexistent or lacked 

specificity. Far too many supporting documents 

(10 percent to 15 percent) could not be located 

or were not in agreement with recorded values. 

• Progress: OCFO continues to review affected 

account balances. Responsible positions are 

being identified for timely reconciliation and 

maintenance of supporting documentation. 

• Remaining Effort: 

1. Fully document the criteria for each type 

of supporting documentation and related 

responsibilities for and periods of their 

retention. 

2. Assess retention policies, filing systems and 

the need for a custodian of records. 

3. Determine the feasibility of imaging all 

documents. 

• Time Frames: (1) December 2005; (2) and (3) 

March 2006. 

• Impediments: Resources required for imaging, 

if otherwise feasible. 

Reconciliation of Fund Balance with 

Treasury (High Risk) 

• Source: FY 2004 audit (NoF-05-FIN-2004) 

• Weakness: The Odyssey system did not 

produce reports supporting the Statement of 

Transactions, with such reports required for 

reconciliations. The recorded balance of funds 

with the U.S. Treasury was not reconciled 

with Treasury records. Items on the Treasury 

Statement of Differences were not researched 

and resolved in a timely manner. 

• Progress: A Discoverer report was developed 

to provide detail to produce the Statement of 

Transactions and then reconcile it with U.S. 

Treasury records. However, the report needs 

further improvement to include transaction 

details that are needed to research differences. 

National Finance Center transactions are 

reconciled on a real-time basis. Reconciliations 

of U.S. Department of State transactions and 

resolution of Statement of Differences items are 

more current. 

• Remaining Effort: 

1. Continue to improve automated and 

manual reconciliations and implement 

a formal reporting mechanism to advise 

senior OCFO managers monthly of the 

status of these reconciliations. Incorporate a 

lessons-learned segment into the report. 

2. Continue to work with the posts and the 

U.S. Department of State regional finance 

centers to develop coding schemas to make 

the data for both systems more compatible. 

• Time Frames: (1) December 2005; and (2) June 

2006. 

• Impediments: N/A 
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Distinction between Federal and NonFederal Transactions (High Risk) 

• Source: FY 2004 audit (NoF-02-FIN-2004) 

• Weakness: Policies, procedures, financial 

systems, and, consequently, the financial 

statements did not make the required 

distinction between federal (intragovernmental) 

and non-federal (public) transactions. 

• Progress: Successfully tested the use of trading 

partner (i.e., intra-governmental agencies) as the 

source of this data for journal entries and moved 

it into production in late July. 

• Remaining Effort: Expand the use of trading 

partners to other modules so that the reportable 

data is provided by Odyssey; then train end 

users.

• Time Frame: September 2006

• Impediments: N/A

Advances/Receivables (High Risk) 

• Source: FY 2004 audit (NoF-07-FIN-2004) 

• Weakness: Management does not have a policy 

for reviewing advances and reclassifying them 

as receivables within a reasonable amount of 

time. And management does not have a policy 

to ensure interest is charges on delinquent 

indebtedness. 

• Progress: In June 2005 management issued 

policy guidance for the monitoring and 

collection of outstanding advances. Additionally 

during all of the fiscal year 2005 special efforts 

were directed at validating and clearing all 

advances, particularly ones issued prior to fiscal 

year 2005. At the beginning of fiscal year 2005 

these advances totaled about $468k. By the end 

of the fiscal year, these advances were reduced 

by 69% to an approximately $147k. During this 

‘cleanup’ process advances were reclassified as 

receivables where appropriate. Peace Corps will 

begin assessing interest to its debtors with the 

new financial management system upgrade 

implementation which is scheduled for January 

2006. 

• Remaining Effort: 

1. Finalize the decision on waiving interest on 

Volunteers’ indebtedness. 

2. Assessing interest on debt. 

3. Continue efforts to validate fiscal years 

2000-2004 advance balances with 

corrections and collections. 

• Time Frames: (1) December 2005; (2) January 

2006; and, (3) June 2006. 

• Impediments: N/A 

Host Country Contributions (HCCs) 

(Medium Risk) 

• Source: FY2004 Audit (NoF-14-FIN-2004) 

• Weakness: HCCs were not captured in the 

financial management system and, thus, 

not reported in the financial statement but 

were referenced in the notes to the financial 

statements. 

• Progress: Execution (obligations and 

disbursements) against the HCC accounts are 

recorded in Odyssey. 

• Remaining Effort: All of the HCC accounts 

need to be reconciled with State Department 

and US Treasury to resolve the abnormal and 

inconsistent balances as of September 30, 2005. 

• Time Frames: December 2005. 

• Impediment: N/A. 

Retention of Personnel (Medium Risk)

• Source: FY2004 Audit (NoF-12-FIN-2004)

• Weakness: Turnover in financial positions 

prevents retention of knowledge capital and 

limits operational efficiencies.

• Progress: The interim OCFO reorganization 

established managerial positions with better 

defined scope of responsibilities. Special effort 

was made to recognize deserving employees 

with monetary awards.
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• Remaining Effort: 

1. Perform business process reviews, identify 

required resources and implement the rest 

of the OCFO reorganization.

2. Assess the feasibility and affordability of 

a long term teaming relationship with a 

financial services contractor.

3. Assess the feasibility of participating in the 

Federal Career Intern Program and/or the 

Career Experience Program.

• Time Frame: (1) October 2006; (2) March 

2006; (3) December 2005

• Impediment: Budgetary resources for Item 2.

Purchase Cards (Medium Risk)

• Source: FY2004 Audit (NoF-15-FIN-2004)

• Weakness: Extensive manual effort is required 

to resolve purchase card payments rejected by 

Odyssey because of incorrect or understated 

obligations. Posts are using the purchase card to 

pay for travel related expenses.

• Progress: Contracting personnel emphasized 

appropriate card use, prohibited purchases, 

monetary limits and fraud in cardholder 

training sessions. The agency expanded the 

Centrally Billed Account (CBA) Travel Card to 

overseas posts.

• Remaining Effort: N/A

• Time Frame: N/A

• Impediment: N/A

Reconciliation of FSN Pay (Medium Risk)

• Source: FY2004 Audit (NoF-16-FIN-2004)

• Weakness: There is no procedure to reconcile 

obligated FSN pay with the actual amount paid 

by the Department of State.

• Progress: Ensured that posts receive monthly 

payroll reports from the corresponding 

Embassy.

• Remaining Effort:

1. Publish procedures for performing a monthly 

payroll reconciliation.

2. Require the quarterly submission of the 

reconciliations to OCFO.

• Time Frames: (1) December 2005; 

(2) March 2006

• Impediment: N/A

Overdue Collections (Medium Risk)

• Source: FY2004 Audit (NoF 17-FIN-2004)

• Weakness: There is no policy or procedures 

for dealing with overpayments resulting from 

extraordinary situations, e.g., overpayments of 

evacuation allowances. The resulting delinquent 

receivables were not managed in accordance 

with debt collection requirements.

• Progress: The indebtedness for the 

overpayments in question were waived with 

General Counsel concurrence.

• Remaining Effort: Determine if existing agency 

policies (which permit such waivers) need to be 

clarified.

• Time Frame: December 2005

• Impediment: N/A

Prompt Payment Procedures (Low Risk)

• Source: FY2004 Audit (NoF-19-FIN-2004)

• Weakness: Posts do not consistently indicate 

the date received on invoices to establish the 

Prompt Payment timeline.

• Progress: The requirement to date stamp 

invoices was published in CFO Bulletin 05-02 

in April 2005.

• Remaining Effort: Incorporate the requirement 

in the OFMH.

• Time Frame: December 2005

• Impediment: N/A
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Medical Services (Medium Risk) 

• Source: FY2004 Audit (NoF-11-FIN-2004)

• Weakness: Post inventory procedures for 

medicines are inadequate. 

• Progress: A working group has been formed to 

review current processes for monitoring and 

controlling medical supply ordering, storage, 

and disposal. 

• Remaining Effort: 

1. Complete review and provide resulting 

recommendations to senior management. 

2. Incorporate approved revisions in the Peace

Corps Manual and Technical Guidelines. 

• Time frames: (1) March 2006; and 

(2) September 2006. 

• Impediments: N/A 

Medical Services (Medium Risk) 

• Source: FY2004 Audit (NoF-11-FIN-2004)

• Weakness: The policy portions of the Medical 

Services Handbook need to be incorporated 

into the Peace Corps Manual. The latter needs 

to recognize the former as the official medical 

services procedures manual. 

• Progress: The Medical Evacuation Section 

(MS264) has been updated. 

• Remaining Effort: Publish the remaining 

revised portions of the Peace Corps Manual. 

• Time frame: September 2006. 

• Impediments: N/A

Contracting Authority (Medium Risk)

• Source: FY2004 Audit (NoF 13-FIN-2004)

• Weakness: Posts are not consistently requesting 

additional delegations of authority before 

entering into contracts over $50,000.

• Progress: Procedures were implemented 

to delay processing of payment requests on 

contracts exceeding the $50,000 limit until 

the required waivers are provided. The Office 

of Acquisition and Contract Management sent 

a memo to all posts detailing the policies and 

procedures on Country Director contracting 

authority and incorporated that guidance in 

material presented at workshops, conferences 

and training sessions.

• Remaining Effort: N/A

• Time Frame: N/A

• Impediment: N/A

Contingency Recovery Plans (High Risk) 

• Source: FY2004 audit (NoF-02 and 17-IT2003). 

• Weakness: There were no contingency recovery 

plans for Odyssey or FOR Post/HQ. 

• Progress: Plans have been drafted and recovery 

testing is scheduled. Conducted two successful 

recovery tests of Odyssey at the SunGuard 

site (the Peace Corps’ COOP site for systems 

recovery). 

• Remaining Effort: Finalize plans; modify the 

SunGuard contract to include FOR Post/HQ 

data. 

• Time Frames: Finalize plans (January 2006) 

and test FOR Post/HQ recovery (May 2006) 

• Impediment: N/A 

current status of prior year audit recommendations 

not directly involving financial Processes

X
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appendices

Inadequate Termination Procedures 

(Medium Risk)

• Source: FY2004 audit (NoF-03-IT-2003)

• Weakness: The personnel tracking system 

(PTS) does not automatically update when an 

employee is terminated. PTS does not interface 

with Odyssey. 

• Progress: Completed; the user is now 

automatically deactivated in Odyssey and 

PRISM based on deactivation in PTS. 

• Remaining Effort: N/A

• Time Frame: N/A

• Impediment: N/A

Systems Access (Low Risk) 

• Source: FY2004 audit (NoF-07-IT-2003)

• Weakness: There was no formal process (or 

policy/procedures) for granting user access to 

the FOR Post/HQ applications. 

• Progress: A form was approved and is being 

used. 

• Remaining Effort: Incorporate the use of the 

form in applicable policy/procedure documents. 

• Time Frame: March 2006. 

• Impediment: N/A 

FOR Post/HQ Audit Logs (Medium Risk) 

• Source: FY2004 audit (NoF-08-IT-2003)

• Weakness: There were no audit logs that were 

automatically generated by the FOR Post/HQ 

applications. 

• Progress: FOR HQ auditing was enabled. 

• Remaining Effort: Establish an audit review 

process. 

• Time Frame: March 2006 

• Impediment: N/A 

FOR Post/HQ Data Integrity (High Risk) 

• Source: FY2004 audit (NoF-09-IT-2003)

• Weakness: The FOR Post/HQ applications have 

inadequate data integrity validation controls in 

place.

• Progress: Satisfied through the implementation 

of FOR Post data encryption. 

• Remaining Effort: N/A 

• Time Frame: N/A

• Impediments: N/A 

System Development Life Cycle (SLDC) 

(High Risk) 

• Source: FY2004 audit (NoF-10-IT-2003)

• Weakness: The SLDC methodology for FOR 

Post/HQ has not been finalized. Changes to 

the application are occurring without a formal 

change control process. 

• Progress: Completed; there are no material 

differences from the agency SDLC. 

• Remaining Effort: N/A 

• Time Frame: N/A 

• Impediment: N/A 

FOR Post/HQ No Contingency Plan 

(High Risk) 

• Source: FY 2004 audit (NoF-11-IT-2003). 

• Weakness: There were no contingency recovery 

plans for FOR Post/HQ. 

• Progress: Plans have been drafted. 

• Remaining Effort: Finalize plans; modify the 

SunGuard contract to include FOR Post/HQ 

data. 

• Time Frames: Finalize plans (January 2006) 

and test FOR Post/HQ recovery (May 2006) 

• Impediments: N/A 
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FOR Post/HQ Segregation of Duties 

(Medium Risk)

• Source: FY2004 audit (NoF-12-IT-2003)

• Weakness: Developers have access to the 

system’s production environment.

• Progress: Staffing limitations necessitate that 

developers also provide functional support. 

• Remaining Effort: Evaluate periodic monitoring 

of audit logs as a compensating control.

• Time Frame: December 2005

• Impediment: N/A

Odyssey Audit Logs (Medium Risk)

• Source: FY2004 audit (NoF-16-IT-2003)

• Weakness: There are no procedures to address 

the monitoring and review of Odyssey access 

logs.

• Progress: Odyssey auditing is enabled.

• Remaining Effort: Establish review procedures.

• Time Frame: December 2005

• Impediment: N/A

Overseas Small Business Server (SBS) 

Vulnerabilities (High Risk)

• Source: FY2004 audit (NoF-20/22-IT-2003)

• Weakness: There are vulnerabilities associated 

with overseas SBS and workstations that are 

mainly due to non-current system and security 

patches.

• Progress: The new Overseas Refresh is complete 

for the IAP Region. This new architecture will 

allow quarterly distribution of low priority 

patches and immediate distribution of critical or 

emergency fixes.

• Remaining Effort: Complete the Overseas 

Refresh for the other regions.

• Time Frame: EMA-September 2006 and AFSeptember 2007

• Impediment: N/A

Certification and Accreditation (High Risk) 

• Source: FY 2004 audit 

(NoF-20 and 23-IT-2004) 

• Weakness: Odyssey and FOR Post/HQ have 

only an interim authority to operate and have 

not been fully certified or accredited. 

• Progress: The OCFO and the CIO IT security 

office staffs are coordinating efforts to identify 

remaining tasks. 

• Remaining Effort: Complete the certification 

and accreditation. 

• Time Frame: September 2006 

• Impediment: N/A 

Odyssey FTP (High Risk) 

• Source: FY 2004 audit (NoF-21-IT-2004) 

• Weakness: Odyssey connections with other 

Peace Corps systems are not encrypted. File 

transfer protocol (FTP) is considered an 

insecure data transmission protocol. 

• Progress: Completed; data is now encrypted. 

• Remaining Effort: N/A 

• Time Frame: N/A 

• Impediment: N/A 

Funding for Posts (High Risk) 

• Source: FY 2004 audit (NoF-22-IT-2004) 

• Weakness: Posts have insufficient resources 

for adequate software/hardware support and 

security training for IT personnel. 

• Progress: A new overseas server and workstation 

image release was deployed to the InterAmerica and Pacific (IAP) posts. 

• Remaining Effort: Deploy to remaining posts. 

• Time Frame: March 2007 

• Impediment: N/A 
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Odyssey Account Review (Medium Risk) 

• Source: FY2004 audit (NoF-24-IT-2004) 

• Weakness: There was no formal process 

(or policy/procedures) for reconciling Odyssey 

user accounts.

• Progress: A quarterly report of active user 

accounts is distributed.

• Remaining Effort: Incorporate the use of 

the report in applicable policy/procedure 

documents. 

• Time Frame: March 2006. 

• Impediment: N/A 

Odyssey User Account Controls 

(Medium Risk) 

• Source: FY2004 audit (NoF-25-IT-2004)

• Weakness: The system does not log out users 

after a specified period of inactivity and permits 

multiple active sessions with the same user ID.

• Progress: The appropriate security configuration 

was enabled. 

• Remaining Effort: N/A

• Time Frame: N/A 

• Impediment: N/A 

Odyssey Segregation of Duties 

(Medium Risk)

• Source: FY2004 audit (NoF-26-IT-2004)

• Weakness: There are users that have both 

system administrative and functional user roles 

within the Odyssey system.

• Progress: TBD

• Remaining Effort: Evaluate as part of the audit 

log review process.

• Time Frame: March 2006

• Impediment: N/A

Odyssey System Administrator Request 

Forms (Medium Risk)

• Source: FY2004 audit (NoF-27-IT-2004)

• Weakness: The majority of system 

administrators do not have managementapproved access request forms on file.

• Progress: Forms were completed and approved.

• Remaining Effort: N/A

• Time Frame: N/A

• Impediment: N/A

Systems Access (Medium Risk) 

• Source: FY2004 audit (NoF-28-IT-2004)

• Weakness: FOR Post/HQ developers have 

access to the production environment. 

• Progress: Justified since staffing limitations 

require developers to also provide functional 

support. 

• Remaining Effort: Evaluate periodic monitoring 

of audit logs as a compensating control. 

• Time Frame: December 2005 

• Impediment: N/A 
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Overseas Posts-Disaster Recovery, 

Security, System and Physical Access and 

Backup Procedures (Medium Risk)

• Source: FY2004 audit (NoF-29-IT-2004)

• Weakness: There are multiple conditions 

relating to the posts’ disaster recovery, security, 

access controls, backup procedures and 

environmental controls.

• Progress: Full backups are performed daily 

and the tape is stored offsite every two weeks. 

Detailed instructions are in place on how to 

restore servers in the case of a disaster. The 

IT Security Plan and IT Specialist Handbook 

are also in place. Each post is required to 

complete an annual vulnerability assessment. 

Additionally, three to five random vulnerability 

assessments are conducted each year.

• Remaining Effort: N/A

• Time Frame: N/A

• Impediment: N/A

Overseas Posts-Overseas Architecture 

Changes and Periodic Architecture 

Compliance Reviews (Medium Risk)

• Source: FY2004 audit (NoF-30-IT-2004)

• Weakness: There are a number of system 

settings which have a negative effect on the 

overall network security. 

• Progress: The new Overseas Refresh is complete 

for the IAP Region. This new architecture will 

allow quarterly distribution of low priority 

patches and immediate distribution of critical or 

emergency fixes.

• Remaining Effort: Complete the Overseas 

Refresh for the other regions.

• Time Frame: EMA-September 2006 and AFSeptember 2007

• Impediment: N/A

. 
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AF Africa Region

BFO Budget and Fiscal Office(r)

BFY Budget Fiscal Year

BIT Budget Implementation Team

CC Crisis Corps

CCV Crisis Corps Volunteer

CD Country Director

CDA Country Desk Assistant

CDO Country Desk Officer

CDU Country Desk Unit

CFO Chief Financial Officer

CHOPS Chief of Operations

CMA Centrally Managed Account

CME Continuing Medical Education

COLA Cost of Living Adjustment

COS Close of Service

COTR Contracting Officer’s Technical Representative

COTS Commercial Off-the-Shelf

CPU Central Processing Units

CR Continuing Resolution

DOL U.S. Department of Labor

DOS U.S. Department of State

EAC Emergency Action Committee

EAP Emergency Action Plan

ECS Electronic Certification System

EFT Electronic Funds Transfer

EL Emergency Leave

EMA Europe, Mediterranean, and Asia Region

EOD Enter on Duty

EOT End of Tour

ER Exchange Rate

ET Early Termination

FAM Foreign Affairs Manual

FCH Fiscal Coding Handbook

FECA Federal Employees Compensation Act

FEGLI Federal Employees’ Government Life Insurance

FEHB Federal Employees’ Health Benefits Program

FEHBA Federal Employees’ Health Benefits Act Program

FERS Federal Employees’ Retirement System

FICA Federal Insurance Compensation Act

FMO Financial Management Officer

FOR Financial Operations Room (e.g., FOR Post, FOR Budget)

FSC Financial Service Center

FSN Foreign Service National

Peace Corps Acronyms

X
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The Peace Corps | performance and accountability report | fiscal year 2005

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FTE Full-Time Equivalent (Employee)

FY Fiscal Year

GAO Government Accountability Office

GC General Counsel

HQ Headquarters

HRM Human Resource Management (Office of)

IAP Inter-America and Pacific Region

ICASS International Cooperative Administrative Support Services

IFO International Financial Operations

IG Inspector General

IPBS Integrated Planning and Budget System

IST In-Service Training

IT Information Technology

MOA Memorandum of Agreement

OCFO Office of the Chief Financial Officer

OFMH Overseas Financial Management Handbook

OIG Office of the Inspector General

OMB Office of Management And Budget

OMS Office of Medical Services

OPSI Office of Private Sector Initiatives

OSS Office of Special Services

OST Overseas Staff Training

OVS Office of Volunteer Services

PASA Participating Agency Service Agreement

PBR Plan and Budget Review

PCMO Peace Corps Medical Officer

PCSSO Peace Corps Safety and Security Officer

PCT Peace Corps Trainee

PCV Peace Corps Volunteer

PPA Planning and Policy Analysis

PSA Public Service Announcement

PSC Personal Services Contractor

PST Pre-Service Training

PVO Private Volunteer Organization

RA Readjustment Allowance

RD Regional Director

RPCV Returned Peace Corps Volunteer

RSO Regional Security Officer (U.S. State Department)

UNV United Nations Volunteer
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